ECONOMIC  STUDIES 

OF 

THE  UNIVERSITY  OF  CHICAGO 


NUMBER  II. 


NOW  READY 

No.  I. 

THE  SCIENCE  OF  FINANCE 

By  Gustav  Cohn.  Translated  from  the  German  by  Dr.  T. 
B.  Veblen.  8vo.  pp.  12  +  800  ;  price  $3.50 


IN  PRESS 

No.  III. 

THE  INDIAN  SILVER  CURRENCY 

By  Karl  Ellstaetter.  Translated  from  the  German  by 
Professor  J.  Laurence  Laughlin 


No.  IV. 

HISTORY  OF  THE  LATIN  UNION 

By  Henry  Parker  Willis 


HISTORY 


OF  THE 

UNION  PACIFIC  RAILWAY 


BY 

HENRY  KIRKE  WHITEvV 

t  • 


SOSTOX  COLLEGE  LIBRARY 
CHESTNUT  HILL,  MASS, 


CHICAGO 

2&ntbersftfi  of  OWcago  ess 

1895 


9CST0N  COLLEGE 

ir^TMl  IT  Mil  I  MASS. 


Copyrighted  by 


THE  UNIVERSITY  OF  CHICAGO 

1895 


* 


<i 


dHjr  JHntberjsitg  of  ffiijiraflo  p  r  r  5  s 


CONTENTS. 


Page 


Chapter  I.  Evolution  of  the  Plan  --------  i 

Chapter  II.  The  Chartering  Acts  -------  13 

Chapter  III.  The  Building  and  the  Cost  of  the  Union  Pacific  Railroad  -  17 

Chapter  IV.  History  of  the  Branch  Roads  ------  38 

Chapter  V.  Internal  History  of  the  Union  Pacific  -----  55 

Chapter  VI.  Public  Opinion,  Legislation,  Litigation  -  68 

Chapter  VII.  Financial  History  of  the  Union  Pacific  -  -  -  -  85 

Chapter  VIII.  Proposals  for  Settlement,  Present  Status  -  -  -  -  94 

Appendix  I.  Acts  Chartering  the  Union  Pacific  Railway  -  101 

Appendix  II.  Tables  ----------  116 

Index  -  -  -  -  --------  125 


CHAPTER  I. 


EVOLUTION  OF  THE  PLAN. 

The  first  railway  to  the  Pacific  claimed  the  attention  of  the 
country  on  two  distinct  bases  —  as  an  element  in  our  political 
history,  and  as  a  commercial  enterprise.  In  the  early  sixties  the 
leading  argument  in  favor  of  building  it  was  the  necessity  of 
strengthening  in  their  allegiance  to  the  Union  the  states  on  the 
Pacific  coast.  Since  the  completion  of  the  road  in  1869  the 
commercial  importance  has  been  the  obvious  one. 

It  was,  moreover,  the  commercial  features  of  the  scheme,  and 
only  in  a  minor  way  the  political  ones,  that  inspired  the  early 
agitation  for  a  road.  In  this  agitation,  which  stretches  far  back 
of  the  Civil  War,  it  is  interesting  to  trace  the  evolution  of  the 
plan  for  connecting  the  two  oceans  by  rail,  and  to  see  how  the 
road  was  considered  at  first  desirable,  then  important,  and  at  last 
necessary. 

The  spirit  of  unrest  which  led  to  the  discovery  of  new  lands 
and  new  routes  to  old  ones  during  the  fifteenth  and  sixteenth 
centuries  was  slow  to  die  out.  The  commercial  spirit  of  Europe 
which  inspired  the  quest  for  a  new  sea  route  to  India  did  not 
subside  with  the  finding  of  an  intervening  continent  and  the  sub¬ 
sequent  failure  to  find  a  Northwest  Passage.  If  there  was  no 
waterway,  a  land  route  was  demanded.  Explorers  had  not  been 
slow  to  trace  the  great  natural  waterway  leading  into  the  heart 
of  the  continent  furnished  by  the  Great  Lakes,  but  advances 
west  of  Lake  Superior  were  inconsiderable.  Thus  far  the  French 
had  led  ;  here  they  stopped. 

The  completion  of  the  task  was  reserved  for  Anglo-Saxon 
genius.  The  first  attempt  to  find  a  way  across  the  continent 
westward  from  the  lakes  was  made  in  1763  by  Captain  Jonathan 


2 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Carver,1  of  the  British  provincial  army,  but  this  was  prompted 
rather  by  the  spirit  of  the  explorer  than  by  the  commercial 
spirit.  During  the  early  years  of  this  century,  however,  there 
was  a  genuine  attempt  toward  opening  a  road  —  the  Lewis  and 
Clarke  expedition.2  This  was  one  of  President  Jefferson's  plans, 
and  he  drafted  with  his  own  hand  the  instructions  for  its  leaders. 

Roadmaking  began  a  new  era  when,  in  1829,  Stephenson 
made  the  locomotives  success.  The  next  year  saw  the  introduc¬ 
tion  of  the  railway  into  America,  and  two  years  later  there  was 
published  an  article  proposing  a  railway  to  the  Pacific.3  The 
idea  spread  rapidly,  and  in  1836  there  was  held  the  first  public 
meeting  to  consider  the  project.4  From  1842  on,  John  C.  Fre¬ 
mont  did  much  valuable  work  in  preparing  the  public  mind  for 
the  future  Pacific  railway  by  the  accounts  which  he  published  of 
his  extensive  travels  in  the  western  country,  thus  correcting 
many  popular  misconceptions  concerning  that  region. 

Asa  Whitney  was,  between  1840  and  1850,  the  most  zealous, 
efficient,  and  important  advocate  of  the  Pacific  railway  project. 

1  Probably  the  first  man  to  make  extensive  explorations  in  the  Northwest  in  the 
interest  of  England  was  Carver.  He  was  a  native  of  Connecticut  and  an  officer  in 
the  French  wars  until  1763.  He  spent  two  years  and  five  months  in  explorations,  but 
failed  to  effect  what  he  had  planned  —  an  overland  trip  to  the  Pacific.  In  1767  he 
was  at  Prairie  du  Chien,  Wisconsin;  he  spent  a  winter  “among  the  Naudousee  of  the 
plains,  on  the  river  St.  Pierre  [probably  this  was  in  the  present  state  of  Minnesota, 
on  the  St.  Paul  River],  1400  miles  west  of  Michillimackinac ;  ”  in  October,  1768,  he 
was  back  at  Boston,  after  having  traveled  over  7000  miles,  whence  he  went  to  England 
to  publish  the  results  of  his  investigations.  His  petition  to  the  king  did  not  result  in 
even  the  repayment  of  his  expenses ;  he  was  defrauded  of  the  proceeds  of  the  sale  of 
his  book  of  travels;  and,  in  1780,  he  died  destitute,  at  London,  aged  48.  See  Allen’s 
American  Biographical  Dictionary. 

“Lewis  and  Clarke,  setting  out  late  in  1803  with  28  men,  ascended  the  Missouri; 
in  1805  they  reached  the  Columbia  and  descended  to  its  mouth;  and  after  spending 
the  winter  on  the  Columbia  returned,  reaching  the  Mississippi  again  in  September, 
1806.  Their  route  coincided  roughly  with  that  of  the  Northern  Pacific  Railroad.  See 
Chapter  iii  of  Smalley’s  History  of  the  ATorthern  Pacific  Railroad ,  in  which  there  is 
reference  to  a  complete  account  of  the  journey,  prepared  from  the  journals  of  the 
leaders.  Paul  Allen  edited  it  and  Jefferson  prefixed  a  memoir.  The  last  American 
edition  was  published  in  New  York  in  1843. 

3  In  The  Emigrant ,  of  Ann  Arbor,  Michigan,  for  February  6,  1832. 

4  This  was  called  by  John  Plumbe,  a  civil  engineer,  at  Dubuque,  Iowa. 


EVOLUTION  OF  THE  PLAN. 


3 


Mr.  Whitney  was  a  New  York  merchant  in  the  China  trade  who 
had  gained  a  considerable  knowledge  of  the  geography  of  the 
West  and  also  of  its  needs  and  its  possibilities.  By  incessant 
lecturing  and  writing,  and  by  personal  contact  with  leading  men, 
he  made  his  influence  very  widely  felt,  and  impressed  upon  a 
vast  number  of  people  his  views  of  the  need  and  the  feasibility 
of  a  Pacific  railway.  He  has  the  honor  also  of  having  formu¬ 
lated  the  first  definite  plan  for  a  road.  Although  this  never 
received  the  sanction  of  Congress  it  is  important  as  indicating 
the  first  stage  in  the  evolution  of  the  Pacific  Railway  Act. 

Whitney’s  plan,  although  it  varied  somewhat  in  details  at 
different  dates,  may  be  stated  as  it  is  found  in  his  third  “  Memorial 
to  the  Senate  and  House  of  Representatives  of  the  United  States 
in  Congress  assembled.”1  He  here  proposed  to  build  a  line  of 
railway,  beginning  at  Lake  Michigan,  westward  to  the  Pacific. 
He  says  : 

“Your  memorialist  would  now  represent  and  explain  the 
plan  by  which  he  proposes  to  carry  out  this  great  work.  He 
prays  that  your  honorable  body  will  be  pleased  to  set  apart,  and 
sell  to  him,  sixty  miles  wide  of  the  public  lands  (and  an  equiva¬ 
lent  for  any  which  may  have  been  taken  up)  from  Lake  Michigan 
to  the  Pacific  Ocean,  for  this  especial  purpose.  He  has  explored 
and  examined  a  part  of  the  route;  and  from  the  lake  onward, 
for  800  miles,  the  land  is  of  the  very  best  quality,  but  nearly 
500  miles  of  this  800  without  timber,  and  then  no  timber  on  to 
the  Rocky  mountains. 

“  That,  after  this  800  miles,  onward  nearly  to  the  ocean,  the 
land  is  represented  as  very  poor  —  too  poor  to  sustain  settle¬ 
ment.  Therefore,  the  whole  work  is  based  upon  the  800  miles 
of  the  first  part,  with  the  belief  that  the  facilities  which  the 
road  would  create  and  give  to  settlement,  intercourse,  and  com- 

1  The  first  was  presented  in  1845,  and  the  result  was  the  introduction,  July  31,  1846, 
by  Senator  Breeze,  of  the  Committee  on  Public  Lands,  of  a  bill  to  give  effect  to 
Whitney’s  ideas.  See  Congressional  Globe,  Twenty-ninth  Congress,  first  session,  p. 
1 1 7 1 .  The  second  was  presented  in  1846.  The  third  is  dated  Washington,  March 
17,  1848.  All  three  are  given  as  appendices  to  No.  140  of  the  Reports  of  Co?n?/iittees 
of  the  House  of  Representatives,  Thirty-first  Congress,  first  session. 


4 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


munication  with  the  markets,  would  render  a  part  of  the  poor 
land  useful  and  available. 

“Your  memorialist  does  not  ask  your  honorable  body  for  the 
appropriation  of  one  dollar  in  money,  or  even  for  a  survey  of 
the  route.  He  proposes  to  make  the  surveys,  commence  the 
work,  with  machinery,  preparations,  and  arrangements  for  its 
continuance,  and  complete  ten  miles  of  road,  at  his  own 
expense ;  and  when  the  ten  miles  is  completed  to  the  satisfac¬ 
tion  of  a  commissioner  (appointed  as  your  honorable  body  shall 
direct),  and  with  his  satisfaction  that  the  work  will  be  continued, 
then  your  memorialist  would  receive  five  miles,  or  one-half  of 
the  lands  on  the  line  of  the  ten  miles  of  road  completed,  with 
which  to  reimburse  himself;  the  other  five  miles,  or  half  of  the 
lands,  to  be  held  by  the  government*;  and  so  on  for  each  and 
every  ten  miles  for  the  800  miles  of  good  land,  or  so  far  as  the 
one-half  of  the  land  set  apart  will  furnish  means  to  complete 
ten  miles  of  road.  Thus  the  road  would  be  completed  for  the 
800  or  more  miles,  and  in  operation,  with  one-half  (the  alternate 
five  miles)  settled  with  towns,  villages,  and  cities,  while  the 
other  half  (or  alternates)  held  by  the  government  would  be 
enhanced  in  value  more  than  fourfold  what  all  is  now  worth, 
and  held  or  sold  as  the  demand  for  actual  settlement  may 
require,  but,  when  sold,  to  be  sold  as  Congress  shall  direct,  and 
the  proceeds  held  as  a  fund  to  continue  and  complete  the  road 
through  the  poor  lands  all  to  the  ocean ;  and  the  road  and 
machinery  also  held  by  the  government  as  further  security  that 
the  work  will  be  continued  and  completed.  Beyond  the  800 
miles  of  good  lands,  and  through  the  poor  lands,  when  each 
and  every  ten  miles  of  road  shall  have  been  completed,  and  the 
entire  ten  miles  by  sixty  of  lands  do  not  furnish  means  to  reim¬ 
burse  for  the  actual  outlay,  then  the  fund  which  may  have  been 
accumulated  from  the  reserved  half  of  good  lands,  or  the  lands, 
shall  be  applied  to  this  purpose ;  but,  in  all  cases,  the  ten  miles 
of  road  must  be  completed  to  the  satisfaction  of  the  commis¬ 
sioner,  before  any  lands,  or  money  from  land  sold,  can  be 
touched  by  your  memorialist  and  associates. 


EVOLUTION  OF  THE  PLAN. 


5 


“When  the  road  is  so  far  advanced  that  security  can  be 
given  to  the  government  that  it  will  be  completed,  then  your 
memorialist  shall  pay  to  the  government  16  cents  per  acre  for 
all  the  lands  set  apart  of  this  work ;  but  the  balance,  with  the 
fund  from  the  half  of  the  good  lands,  if  any,  after  the  road  is 
completed,  shall  be  held  subject  to  keep  the  road  in  repair  and 
operation  while  it  may  be  considered  as  an  experiment,  and  until 
by  its  earnings  it  can  provide  for  itself ;  then  the  surplus  lands, 
and  funds,  if  any,  with  the  road  and  machinery,  shall  belong  to 
and  be  the  property  of  your  memorialist  and  his  heirs  and 
assigns ;  but  leaving  with  Congress,  if  necessary,  the  power  of 
prescribing  the  mode  of  sale  for  any  lands  at  public  auction  to 
the  highest  bidder,  and  leaving  with  Congress  the  power  of  fix¬ 
ing  and  regulating  the  tolls  of  said  road  forever  after,  sufficient 
only  for  repairs,  operation,  and  necessary  expenses  ;  with  power 
also  to  fix  and  regulate  the  transportation  of  United  States  mails, 
troops,  and  munitions  of  war,  etc.,  belonging  to  the  government 
—  thus  making  it  a  national  road,  still  built  and  carried  on  purely 
as  an  individual  enterprise,  without  any  government,  political,  or 
party  machinery  or  influence.”  1 

Mr.  Whitney  went  on  to  estimate  the  length  of  the  road  at 
2030  miles,  for  which  the  grant  of  land  would  be  nominally 
77,952,000  acres,  but  practically  about  two-fifths  of  that 
amount,  granting  that  only  the  first  800  miles  of  the  road  would 
run  through  valuable  lands.  From  the  sale  of  these  lands  Whit¬ 
ney  believed  that  he  would  be  able  to  obtain  the  sum  necessary 
for  the  accomplishment  of  his  task,  and  he  estimated  the  neces¬ 
sary  expense  at  $60,600,000  for  the  completed  road.2 

UThe  fanatical  nature  of  the  man  is  evident  when  Whitney 
says  :  “My  desire  and  object  have  been  to  carry  out  and  accom¬ 
plish  this  great  work  for  the  motives,  as  here  and  everywhere 
else  by  me  declared,  to  give  my  country  this  great  thoroughfare 
^for  all  nations  without  the  cost  of  one  dollar  ;  to  give  employment 
to  and  make  comfortable  and  happy  millions  who  are  now  desti- 

1  Third  memorial  referred  to  above,  pp.  37  and  38. 

*  Ibid.,  p.  38. 


6 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


tute  and  starving,  and  to  bring  all  the  world  together  in  free 
intercourse  as  one  nation.  If  it  is  feared  that  the  remuneration 
will  be  disproportionate  to  the  extent  and  importance  of  the 
work,  then  I  am  ready  to  relinquish  any  claim  I  may  have  for 
compensation,  and  let  the  people  give  me  anything  or  nothing, 
as  they  please.  If  they  will  but  allow  me  to  be  their  instrument 
to  accomplish  this  great  work,  it  is  enough.  I  ask  no  more.  I 
am  willing  to  have  my  acts  scanned  ;  but  I  feel  that  I  ought  not 
to  be  doubted  when  I  say  that  what  I  have  done,  and  what  I 
propose  to  do,  is  nQt  for  the  gain  of  wealth,  or  power,  or  influ¬ 
ence,  but  for  the  great  good  which  I  am  persuaded  it  must  pro¬ 
duce  to  our  whole  country.  I  have  undertaken  this  mighty 
work,  because  I  know  that  someone’s  whole  life  must  be  sacrificed 
to 

uVhen  Whitney  presented  to  Congress  his  third  memorial,  his 
plan  had  been  formally  approved  by  public  gatherings  and 
boards  of  trade  in  a  great  number  of  widely  scattered  cities,  and 
also  by  the  legislatures  of  16  states.  The  distribution  of  the 
approving  states  shows  the  total  lack  at  this  time  of  sectional 
feeling  in  the  treatment  of  the  project^/  Of  the  New  England 
states  the  list  contains  five  —  Maine,  New  Hampshire,  Vermont, 
Rhode  Island,  and  Connecticut;  of  the  middle  states  three  — 
New  York,  New  Jersey,  and  Pennsylvania  ;  of  the  southern  states 
five  —  Kentucky,  Tennessee,  Maryland,  Georgia,  and  Alabama  ; 
and  of  the  central  states  three  —  Ohio,  Michigan,  and  Indiana.2 
As  the  Union  at  this  time  consisted  of  but  thirty  states,  a  major¬ 
ity  of  them  had  sanctioned  the  plan.\jhese  16  states,  moreover, 
contained  65  per  cent,  of  the  population  of  the  UniorfTI| 

1  Pamphlet  issued  in  1849. 

2  As  appendices  to  Report  No.  140,  referred  to  in  note  p.  3,  there  are  given  the 
resolutions  passed  by  14  of  these  legislatures.  Accompanying  the  list  of  states  pass¬ 
ing  such  resolutions  is  this  statement :  “  In  most  instances,  the  resolutions  of  the 
above  state  legislatures  passed  both  houses  by  an  unanimous  vote,  and  in  all  cases  by 
large  majorities  —  more  than  two-thirds”  (p.  21).  The  states  specified  are  as  in  the 
text.  In  the  memorial  quoted  above  Mr.  Whitney  says  that  17  had  approved  his  plan 
(p.  43)-  In  a  letter  written  at  Washington,  February  24,  1849,  he  says  19  have  done  so. 
The  Democratic  Review ,  vol.  xxiii,  p.  405,  gives  the  list  in  the  exact  order  of  the 
Committee’s  Report,  but  makes  two  important  insertions  —  Illinois  and  Iowa.  Includ- 


EVOLUTION  OF  THE  PLAN. 


7 


Thus  accredited  Whitney  brought  his  scheme  before  Con¬ 
gress.  the  House  of  Representatives  his  memorial  was  referred 
to  the  Committee  on  Roads  and  Canals,  by  whom  a  report  was 
submitted  March  13,  1850.  This  highly  commended  Whitney’s 
plan  and  mapped  out  the  arguments  in  favor  of  a  Pacific  railway 
as  follows  :  ( 1 )  It  will  cement  the  commercial,  social,  and  polit¬ 

ical  relations  of  the  East  and  the  West.  (2)  It  will  be  a  high¬ 
way  over  which  will  pass  the  commerce  of  Europe  and  Asia,  to 
the  great  advantage  of  our  country.1  (3)  It  will  tend  to  secure 
the  peace  of  the  world.  (4)  It  will  transfer  to  the  United  States 
part  of  the  commercial  importance  now  held  by  Great  Britain. 

The  committee  proceeded  to  state  why  they  preferred  Whit¬ 
ney’s  plan  to  any  of  the  others  which  were  being  talked  of  in 
an  indefinite  way.  Their  reasons  were  given  thus:  (1)  This  is 
a  private  enterprise,  in  which  the  government  is  in  no  way 
entangled.  (2)  This  route  has  fertile  land  and  timber  in  greater 
quantities  than  any  of  the  more  southerly  ones.  (3)  The  rivers 
are  more  easily  bridged  at  the  north.  (4)  Owing  to  the  dryness 
of  the  atmosphere  the  snow-fall  is  less  than  on  the  other  routes. 
(5)  The  northern  passes  are  at  lower  altitudes.  (6)  Animal 
and  vegetable  products  which  would  be  ruined  by  carriage 
through  a  warmer  region  can  here  be  transported  without  danger. 
(7)  The  higher  the  latitude  the  shorter  the  distance  to  be 
traversed.  (8)  This  plan  creates  the  means  for  carrying  itself 
out.  (9)  No  other  plan  proposes  to  lower  the  price  of  trans¬ 
portation  to  its  cost/] 

Accompanying  this  report  the  committee  presented  a  bill 
putting  into  proper  legal  form  Whitney’s  proposal  as  given  above, 
except  that  the  price  per  acre  was  made  10  cents  instead  of 

«  i* 

16  cents. 

ing  these  in  the  list  Whitney’s  plan  was  approved  by  the  legislatures  representing  70 
per  cent,  of  the  people  of  the  United  States. 

1  There  was  a  great  deal  of  speculation  as  to  the  amount  of  freight  passing 
between  Europe  and  Asia  which  would  take  this  route,  and  the  belief  seems  to  have 
been  very  general  that  it  would  be  considerable.  All  these  calculations  were  upset  by 
the  opening  of  the  Suez  Canal,  which  occurred  about  six  months  after  the  completion 
of  the  railway. 


8 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


In  the  Senate,  Bright,  of  the  Committee  on  Roads  and  Canals, 
presented  on  the  12th  of  September,  1850,  an  elaborate  report 
and  a  bill  providing  for  the  grant  to  Whitney.1  Neither  of 
these  bills  ever  came  to  a  vote. 

Even  before  this  time  men  prominent  in  the  political  world 
had  begun  to  lend  prestige  to  the  Pacific  railway  scheme  by  their 
advocacy  of  it.  Calhoun  had  become  interested  in  it;2  Jefferson 
Davis,  with  an  eye  to  the  advantages  of  the  South,  had  spoken 
strongly  in  its  favor;3  Stephen  A.  Douglas  showed  a  marked 
desire  that  the  project  succeed. 

Salmon  P.  Chase  has  claimed  to  be  the  author  of  the  first  meas¬ 
ure  under  which  the  government  did  any  real  work  toward  securing 
a  road  to  the  Pacific  —  an  appropriation,  in  1853,  of  funds  for  the 
exploration  of  possible  routes  for  the  road.4  During  no  session 

1  Congressional  Globe ,  Thirty-first  Congress,  first  session,  p.  1809. 

2  See  his  reports  while  Secretary  of  War,  and  a  letter  reproduced  in  Hunt's  Maga¬ 
zine ,  vol.  xviii,  p.  593. 

3  At  the  time  of  the  Thirtieth  Congress  he  had  “declared  himself  in  favor  of  build- 

✓ 

ing  a  railroad  ‘  from  the  Mississippi  to  the  western  limit  of  the  territorial  possessions  of 
the  United  States,  from  one  sea  to  another.’  ‘  It  is  not,’  added  the  future  leader  of 
disunion,  ‘  that  I  have  any  want  of  confidence  in  the  attachment  of  any  American 
citizen  to  the  government  of  the  United  States ;  for  I  have  an  abiding  confidence  in 
that  attachment.  I  believe  it  is  not  to  be  broken  off,  however  widely  they  may  be 
separated  from  the  government.’  ” — Galaxy ,  vol.  iv.  p.  486. 

4  “  It  is  among  my  most  pleasing  recollections  of  service  as  a  Senator  from  Ohio, 
that  the  first  practical  measure  looking  to  the  construction  of  a  Pacific  railroad,  which 
received  the  sanction  of  Congress,  was  moved  by  me.  That  measure  was  an  amend¬ 
ment  to  the  army  appropriation  bill,  placing  at  the  disposal  of  the  Secretary  of  War 
one  hundred  and  fifty  thousand  dollars,  to  be  expended  in  surveys  and  explorations  of 
routes  for  the  road.  It  was  adopted  in  the  Senate  in  February,  1853,  and  was  sub¬ 
sequently  concurred  in  by  the  House.  Its  results  are  embodied  in  the  volumes  known 
as  the  Pacific  Railroad  Reports ,  printed  by  order  of  Congress.” 

From  a  letter  of  Mr.  Chase’s  to  General  John  A.  Dix,  dated  Washington,  November 
25,  1863,  and  reprinted  on  pages  158  and  159  of  J.  W.  Schuckers’s  Life  of  Chase.  The 
Act  referred  to  will  be  found  in  10  Statutes  at  Large,  219. 

The  appropriation  of  1853  was  not,  strictly  speaking,  the  first  one  made.  In  the 
Army  Appropriations  Act  of  March  3  1849  (9  Statutes  at  Large,  372),  $50,000  was  set 

aside  “To  defray  the  expenses  of  Topographical  [ - ]  of  surveys  of  routes  from  the 

valley  of  the  Mississippi  to  the  Pacific  Ocean.”  But  I  find  no  record  of  the  funds  hav¬ 
ing  been  used  for  this  purpose. 

The  reports  referred  to  above  by  Mr.  Chase  are  entitled  “Reports  of  Explorations 
and  Surveys  to  Ascertain  the  most  practicable  and  economical  Route  for  a  Railroad 


EVOLUTION  OF  THE  PLAN. 


9 


of  Congress  since  that  time  has  the  Pacific  railway  failed  to 
come  up  for  discussion  of  some  sort. 

few  of  the  earliest  Pacific  railway  bills  which  were  consid¬ 
ered  by  Congress  may  claim  attention  because  they  foreshadowed 
future  action.  On  March  31,  1852,  the  Committee  on  Post 
Offices  and  Post  Roads  in  the  Senate  introduced  a  bill  to  carry 
out  Whitney’s  project.1 

Early  in  1855  there  was  under  consideration  in  the  Senate  a 
bill  providing  for  a  single  road  running  from  the  western  boundary 
of  one  of  the  tier  of  states  which  have  the  Mississippi  for  their 
eastern  boundary,  to  the  eastern  line  of  California.  A  grant  of 
land  and  a  cash  mail  contract  were  to  be  given  to  the  lowest 
bidder  for  the  building  of  such  a  road,  and  bids  were  to  be  received 
from  individuals,  companies,  or  corporations. 

A  substitute  for  this  measure  was  moved  February  15,  1855, 
by  Senator  Gwin,  of  California.  This  provided  for  one  road  to 
begin  at  the  western  boundary  of  Texas,  running  to  the  navigable 
waters  of  the  Pacific  in  the  state  of  California,  to  be  called  the 
Southern  Pacific ;  a  second,  beginning  at  the  western  boundary 
of  Iowa  or  Missouri  and  running  to  San  Francisco,  the  Central 
Pacific  ;  and  a  third,  to  run  from  the  western  boundary  of  Wis¬ 
consin  to  the  navigable  waters  of  the  Pacific  in  Washington  or 
Oregon,  the  Northern  Pacific.  Senator  Gwin’s  substitute  passed 
the  Senate  February  19,  1855,  but  went  no  further.2 

The  House  of  Representatives,  December  20,  i860,  passed  a 

from  the  Mississippi  River  to  the  Pacific  Ocean  made  under  the  direction  of  the  Secre¬ 
tary  of  War,  in  1853-4,  according  to  Acts  of  Congress  of  March  3,  1853,  May  31,  1854, 
and  August  5,  1854.”  The  eleven  volumes  contain  a  wonderful  mass  of  information 
of  all  sorts  concerning  the  trans-Mississippi  country,  and  if  they  were  read  they  would 
certainly  have  proved  to  those  who  still  doubted  it  the  feasibility  of  the  Pacific  rail¬ 
way.  Possible  locations  for  the  road  were  found  at  short  intervals  between  the  thirty- 
second  and  the  forty-ninth  parallels  of  latitude,  their  terminal  points  ranging  from  San 
Diego  to  Puget  Sound  on  the  west,  and  on  the  east  from  Fulton,  Arkansas,  to  St.  Paul, 
Minnesota.  The  air-line  lengths  varied  from  1360  to  1740  miles,  and  the  ground-line 
lengths  from  1 533  to  2290  miles. 

1  Congressional  Globe ,  Thirty-second  Congress,  first  session,  p.  941. 

2  Notice  of  its  passage  by  the  Senate  was  received  by  the  House,  but  it  does  not 
subsequently  appear  on  the  records. — Congressional  Globe,  Thirty-third  Congress, 
second  session,  p.  814. 


10 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


bill  providing  for  a  central  and  a  southern  road,  the  expense  to 
the  government  being  estimated  at  $96,000,000.*  It  was  not 
long  after  this,  however,  that  Congress  ceased  to  consider  propo¬ 
sitions  for  spending  money  on  internal  improvements  in  the 
South,  and  the  southern  line  dropped  out  of  the  plan*] 

Naturally  any  project  which  had  so  strong  a  hold  on  the 
people  of  the  country  as  had  the  Pacific  railway  would  be  made 
use  of  as  political  capital.  The  Republicans  first2  gave  it  party 
recognition  in  their  platform  of  1 856.3  In  i860  the  Democrats 
at  the  Charleston  (S.  C.)  convention  pledged  “such  constitu¬ 
tional  government  aid  as  will  insure  the  construction  of  a  rail¬ 
road  to  the  Pacific  coast  at  the  earliest  practicable  period.”4 
The  other  Democratic  convention  of  that  year,  held  at  Baltimore, 
framed  a  similar  plank,  bounding  their  willingness  to  aid  the  scheme 
by  constitutional  limits  only.5  The  Republican  party  at  its  con¬ 
vention  of  the  same  year  resolved  “That  a  railroad  to  the  Pacific 
Ocean  is  imperatively  demanded  by  the  interests  of  the  whole 
country  ;  that  the  Federal  Government  ought  to  render  immediate 
and  efficient  aid  in  its  construction  ;  and  that,  as  a  preliminary 
thereto,  a  daily  overland  mail  should  be  promptly  established.” 6 
In  June,  1864,  the  Republican  party  again  “ Resolved ,  That  we 
are  in  favor  of  a  speedy  construction  of  the  railroad  to  the 
Pacific  coast.”7  Meanwhile  the  friends  of  the  road  in  Congress 
were  far  from  idle. 

It  would  be  impracticable  to  detail  all  the  propositions  which 
were  presented  for  the  consideration  of  Congress  during  the  fifties 


1  Congressional  Globe,  Thirty-sixth  Congress,  second  session,  p.  17 1. 

2  The  Democratic  Convention  of  1856  was  held  at  Cincinnati  June  2  to  6.  McKee, 
in  his  Platforms  and  Parties,  p.  55,  gives  this  section: 

“  Resolved ,  That  the  Democratic  party  recognizes  the  great  importance,  in  a  politi¬ 
cal  and  commercial  point  of  view,  of  a  safe  and  speedy  communication,  by  military 
and  postal  roads,  through  our  own  territory  between  the  Atlantic  and  Pacific  coasts  of 
this  Union,  and  that  it  is  the  duty  of  the  Federal  Government  to  exercise  promptly  all 
its  constitutional  power  for  the  attainment  of  that  object.” 

In  several  other  places  where  I  have  found  the  platform  no  such  plank  was  given. 

3Stanwood,  History  of  Presidential  Elections,  p.  207. 

*  Ibid.,  p.  219.  Ibid.,  p.  23 1. 

5  Ibid.,  p.  224.  7  Ibid.,  p.  24 1. 


EVOLUTION  OF  THE  PLAN. 


I  I 

and  the  early  sixties.1  Scores  of  bills  were  introduced,  and  many 
ideas  which  were  not  thus  put  into  formal  shape  appeared  in  the 
debates.  The  Whitney  plan  called  for  a  grant  of  all  the  lands 
in  a  strip  60  miles  wide.  A  similar  one  narrowed  the  strip  to 
40  miles  in  width,  and  gave  only  the  alternate  sections.2 
The  40  was  cut  to  30 3  and  then  the  30  miles  was  cut  to  24 
miles.4  Still  another  proposition  gave  ten  alternate  sections 
on  each  side  of  the  track.5  Finally  it  was  cut  down  to  five 
alternate  sections  on  each  side  of  the  track.6  Some  bills 
gave  arable  lands  and  mineral  lands  indiscriminately ;  one 
retained  all  lands  containing  minerals  other  than  coal  or  iron, 
but  replaced  them  with  arable  lands  lying  farther  from  the  road.7 
Another  retained  all  mineral  lands,  replacing  them  in  the  same 
way.  Once  it  was  proposed  that  the  railway  might  buy  mineral 
lands  at  the  regular  price  for  arable  lands.8  It  was  proposed 
that  the  government  organize  the  workmen  on  a  military  basis  ;9  - 
again  that  the  railway  company  be  empowered  to  do  so.10  At 
one  time  a  bill  passed  the  House  of  Representatives  providing 
that  the  road  must  be  completed  within  1  5  years,  and  granting 
an  additional  bonus  in  subsidy  bonds  of  $2,000,000  for  each 
year’s  reduction  from  the  allotted  time.11  One  committee 
reported  a  measure  providing  that  the  bonds  of  the  road  be 
made  salable  by  paying  the  first  year’s  interest  from  the  treasury 
of  the  United  States,  and  guaranteeing  its  payment  for  the  suc- 

xThe  early  congressional  history  of  the  Pacific  railway  has  been  followed,  session 
by  session,  in  John  P.  Davis’s  The  Union  Pacific  Railway  (Chicago,  1894).  Those 
who  wish  a  minute  account  will  find  it  there. 

2  Congressional  Globe,  Thirty-sixth  Congress,  first  session,  p.  2440. 

3  Ibid.,  Thirty-third  Congress,  second  session,  p.  749. 

^  Ibid. 

5  13  Statutes  at  Large,  356. 

6  12  Statutes  at  Large,  489. 

7  Congressional  Globe,  Thirty-sixth  Congress,  first  session,  p.  2440. 

8  Ibid ,  Thirty-eighth  Congress,  first  session,  p.  2328. 

9  ibid..  Thirty-sixth  Congress,  first  session,  p.  2451. 

10 Ibid.,  Thirty-seventh  Congress,  third  session,  p.  1180. 

11  Ibid.,  Thirty-sixth  Congress,  second  session,  p.  381. 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


I  2 

ceeding  19  years.1  Unreasonable  plans  were  discussed  and  laid 
aside.  Reasonable  ones  were  talked  to  death  or  amended  to 
death,  until  it  was  hard  to  tell  whether  the  Pacific  railway  fared 
worse  at  the  hands  of  its  enemies  or  of  its  friends. 

The  project  had  in  early  years  been  for  one  road  only,  the 
northern  one.  Later  the  local  interests  of  the  various  sections 
came  into  the  problem,  and  multiple  road  schemes  were  brought 
forward.  When  the  outbreak  of  the  war  left  legislation  in  the 
hands  of  a  northern  Congress  the  scattered  energies  were  again 
concentrated  on  one  road,  and  that  the  central  one.  After  much 
wrangling,  a  bill  was  framed  which  could  command  enough  votes, 
and  passed  the  House  May  6,  1862,  by  a  vote  of  79  to  4g.2 
The  Senate  passed  it  with  slight  changes  June  20,  35  to  5, 3  the 
House  concurred,  June  24,  in  the  Senate  amendments  by  a  vote 
of  104  to  2 1, 4  and  July  I,  1862,  it  became  a  law5  by  the  signature 
of  President  Lincoln,  who  had  long  warmly  favored  the  project. 

1  Congressional  Globe ,  Thirty-eighth  Congress,  first  session,  p.  2329. 

2  Ibid.,  Thirty-seventh  Congress,  second  session,  p.  1971. 

3  Ibid.,  2840. 

4  12  Statutes  at  Large,  489. 

5  Congressional  Globe,  Thirty-seventh  Congress,  second  session,  p.  2905. 


CHAPTER  II. 


THE  CHARTER  ACTS. 

The  Pacific  Railway  Act  of  1862  had  for  its  object  the  build¬ 
ing  of  a  road  which  should  connect  the  eastern  railway  net  with 
the  one  which  had  already  begun  to  come  into  existence  on  the 
Pacific  coast.  This  road  was  not,  however,  to  begin  where  the 
roads  from  the  East  then  ended.  Across  Iowa  private  initiative 
could  be  trusted  to  supply  the  lack,  so  the  initial  point  of  the 
Pacific  railway  was  located  on  the  Missouri  River,  at  Omaha. 
This  city  had  no  rail  communication  with  the  East  until  Decem¬ 
ber  1867,  when  the  Chicago  and  Northwestern  came  through  to 
that  point. 

The  Pacific  Railway  Act  provided  for  a  road  to  run  from 
Omaha  to  San  Francisco.  The  eastern  portion  of  this  trunk  line, 
from  Omaha  to  the  state  line  of  California,  was  to  be  built  by  the 
Union  Pacific  Railroad  Company.  This  company  was  to  be 
organized  de  novo  for  this  purpose,  the  first  corporation  since  the 
Second  United  States  Bank  to  receive  its  charter  from  the 
National  Government. 

The  western  part  of  the  main  trunk,  from  the  eastern  line  of 
California  to  San  Francisco,  was  to  be  built  by  the  Central 
Pacific  Railroad  Company,  a  California  corporation. 

Besides  this  main  line,  the  act  provided  for  other  branch  lines. 
Each  of  the  various  cities  on  the  Missouri  River  wanted  the 
valuable  privilege  of  being  the  eastern  terminus  of  the  system, 
and  to  quiet  these  demands  a  system  of  branches  was  devised. 
Sioux  City,  on  the  north,  was  provided  for  in  this  way :  When 
that  point  had  been  reached  by  a  railway  running  through  Iowa 
or  Minnesota — i.  e .,  from  Chicago  or  St.  Paul  —  the  Union 
Pacific  Company  was  required  to  construct  a  branch  connecting 

13 


M 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Sioux  City  with  the  main  line  at  a  point  not  west  of  the  one- 
hundredth  meridian.  From  Kansas  City,  the  Leavenworth 
Pawnee  and  Western  was  to  build  an  extension  to  the  north  and 
west,  joining  the  main  line,  like  the  Sioux  City  branch,  at  a  point 
not  west  of  the  one  hundredth  meridian.  This  company  was 
also  authorized  to  build  a  short  line  from  Leavenworth  to  con¬ 
nect  that  city  with  the  Kansas  City  branch.  St.  Joseph  was  to 
be  the  initial  point  of  a  line  by  way  of  Atchison  running 


PACIFIC  R.  R.  SYSTEM  AS  CONTEMPLATED  BY  THE  ACT  OF  JULY  1ST,  1862. 


westward.  It  was  expected  that  100  miles  of  track  would 
suffice  to  effect  a  junction  with  the  Kansas  City  branch.  Thus 
there  would  be  a  symmetrical  system  of  branches  to  collect  the 
traffic  of  the  Missouri  River  points  and  concentrate  it  at  the  one 
hundredth  meridian  for  its  trip  westward.  The  Pacific  railway 
as  contemplated  in  the  Act  of  1862  is  shown  in  the  accompany¬ 
ing  map. 

To  insure  the  building  of  these  roads  a  government  subsidy 
was  offered  in  the  shape  of  a  land  grant  and  a  loan  of  the  credit 
of  the  United  States.  This,  however,  did  not  apply  to  the  short 
line  from  Leavenworth.  On  each  side  of  the  track  the  railway 
company  was  to  receive  five  sections  of  land,  the  alternate  ones 
—  i.  e .,  one-half  the  land  in  a  strip  20  miles  wide.  This  would 
make  the  total  grant  of  land  about  33,000,000  acres. 

But  this  land  grant  could  not  be  made  a  source  of  immediate 
income,  for  sales  must  wait  on  settlement,  and  settlers  would 
come  in  but  slowly  until  the  railway  was  built.  The  credit  loan 


THE  CHARTER  ACTS. 


15 


was  the  device  for  providing  ready  money.  This  aid  was  given 
in  the  following  manner  :  when  short  sections,  of  specified 
lengths,  had  been  completed,  the  Secretary  of  the  Treasury  was 
authorized  to  turn  over  to  the  railway  officials  bonds  of  the 
United  States,  which  could  be  sold.  For  those  portions  of  the 
road  which  ran  through  level  country  —  i.  e.,  east  of  the  Rocky 
Mountains  and  west  of  the  Sierra  Nevadas  —  there  were  to  be 
given  for  every  mile  of  road  sixteen  currency  bonds  of  the  United 
States  of  the  denomination  of  $1000,  to  run  thirty  years,  with 
interest  at  6  per  cent.  For  the  1 50  miles  where  the  road,  leaving 
the  plains,  climbed  across  the  Rockies  to  reach  the  interior 
plateau,  the  bond  subsidy  was  to  be  trebled  —  $48,000  per  mile. 
The  provision  was  the  same  for  the  150  miles  eastward  from  the 
western  base  of  the  Sierra  Nevadas.  For  the  plateau  region 
between  the  Rockies  and  the  Sierra  Nevadas  the  subsidy  was  to 
be  $32,000  per  mile.  Thus  the  total  issue  of  United  States  bonds 
for  the  purpose  of  securing  the  construction  of  the  Pacific  rail¬ 
way  was,  in  round  numbers,  $61,000,000.  But  these  bonds  were 
not  a  gift  to  the  railway  companies  ;  they  were  a  loan,  to  be  repaid 
at  maturity,  principal  and  interest,  and  they  were  constituted  a 
first  mortgage  on  the  roads  which  they  were  issued  to  aid  in 
building.  Such  was  the  offer  which  Congress,  in  1862,  saw  fit  to 
make  for  a  railway  to  the  Pacific.1 

Organization  was  effected  by  the  Union  Pacific  Company 
under  this  act  and  some  work  upon  its  road  was  done,  but  it 
gradually  became  evident  that  the  Pacific  railway  would  not  be 
built  under  the  Act  of  1862. 

Proposals  for  its  amendment  were  not  uncommon,  most  of 
them  aiming  to  secure  the  advantages  of  connection  with  the 
Pacific  railway  system  for  certain  localities,  as  Lawrence, 
Topeka,  etc.2 

But  at  last  there  was  enacted  an  amendatory  act  which 
radically  altered  the  terms  of  the  Act  of  1862.  This  received 

1  A  discussion  of  the  reasons  for  this  congressional  action  and  some  of  the  views 
expressed  by  individual  congressmen  will  be  given  after  the  construction  of  the  road 
has  been  dealt  with. 

2  Congressional  Globe,  Thirty-eighth  Congress,  first  session,  pp.  523,  982,  1022. 


i6 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


the  President’s  signature  July  2,  1864.1  The  most  important 
provision  related  to  the  privilege  of  issuing  bonds  and  to  the 
Government’s  mortgage  on  the  road.  The  companies  received 
the  new  privilege  of  issuing  first  mortgage  bonds  equal  in 
amount  and  of  tenor  similar  to  the  United  States  bonds  provided 
for  in  the  Act  of  1862.  Thus  the  government  gave  up  its  first 
lien  on  the  roads  and  accepted  a  second  one  in  its  stead.  The 
land  grant  was  doubled,  being  made  ten  alternate  sections  on 
each  side  of  the  track  for  every  running  mile  of  road.  Besides 
these  more  important  changes,  which  doubled  the  resources  of 
the  companies,  several  minor  ones  helped  to  put  them  on  a  more 
favorable  footing.2 

1 13  Statutes  at  Large ,  356. 

2  A  more  detailed  discussion  of  the  Acts  of  1862  and  1864  does  not  seem  neces¬ 
sary  at  this  point.  Individual  features  of  them,  which  have  here  been  omitted,  will  be 
mentioned  from  time  to  time  as  the  narrative  requires,  and  the  entire  acts  are  reprinted, 
in  abstract  or  by  citations,  in  the  Appendix,  pages  101  to  115,  for  the  benefit  of  those 
who  wish  to  know  their  terms  more  minutely. 


CHAPTER  III. 


THE  BUILDING  AND  THE  COST  OF  THE  UNION  PACIFIC. 

It  was  not  long  after  the  passage  of  the  Act  of  1862  that 
work  under  it  began.  The  Central  Pacific  Railroad  Company, 
to  which  the  building  of  the  western  end  of  the  line  was  assigned, 
had  been  organized,  in  1861,  under  California  state  law.  On 
October  7,  1862,  it  formally  accepted  the  terms  offered  by  Con¬ 
gress,  and  the  work  of  construction  began  January  8,  1863. 

The  Union  Pacific  Railroad  Company,  which  was  to  build 
the  eastern  part  of  the  line,  effected  its  temporary  organization 
according  to  the  terms  of  the  act,  and  books  for  stock-subscrip¬ 
tions  were  opened  in  the  leading  cities  of  the  country.  Thirty- 
one  shares1  of  $1000  each  were  subscribed  for,  and  $17,300  paid 
in.  There  the  matter  stopped.  Railway  men  knew  that  a  mile 
of  road  in  Illinois  cost  $33,000;  in  Iowa,  $35,000;  in  the  level 
parts  of  California,  $34, 000. 2  A  considerable  proportion  of  the 
able-bodied  men  of  the  country  was  in  the  army,  and  the  prices 
of  both  labor  and  materials  were  abnormally  high.  Between  the 
eastern  system  of  railways  and  the  initial  point  of  the  proposed 
road  was  a  gap  of  hundreds  of  miles,  making  it  necessary  to 
carry  materials  by  way  of  the  Missouri  River,  a  hazardous  and 
costly  mode  of  transportation.  Under  the  circumstances,  the 
capitalists  of  the  country  did  not  consider  the  Union  Pacific  a 
promising  investment. 

Meanwhile,  Thomas  C.  Durant,  of  New  York,  a  man  of  wide 
experience  in  railway  building  and  of  large  resources,  became 

1  Forty-second  Congress,  third  session;  House  Report  No.  78,  February  20,  1873 
(Affairs  of  the  Union  Pacific  Railroad  Company — Mr.  J.  M.  Wilson,  Chairman), 
Testimony  taken  by  the  Committee,  p.  604. 

2  Congressional  Globe ,  Fortieth  Congress,  second  session,  p.  2427. 

17 


18 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


interested  in  the  enterprise  and  took  hold  of  it  with  character¬ 
istic  vigor.  He  not  only  made  a  stock-subscription  of  his  own, 
but  also  secured  subscriptions  among  his  friends.  To  do  this 
he  advanced  for  them  the  io  per  cent,  required  by  law  to  be  paid 
in  before  the  permanent  organization  could  be  effected,  and 
agreed  to  find  persons  to  take  it  off  their  hands  in  case  they 
wished  to  withdraw  from  the  venture.  On  October  29,  1863, 
2177  shares  of  $1000  each  had  been  subscribed  for1  and  a  board 
of  thirty  directors  was  chosen.  In  the  list  we  find  such  names 
as  August  Belmont,  of  New  York;  C.  A.  Lambard,  of  Boston; 
C.  S.  Bushnell,  of  New  Haven  ;  Joseph  H.  Scranton,  of  Scranton, 
Pennsylvania;  J.  Edgar  Thompson,  of  Philadelphia;  S.  C.  Pom¬ 
eroy,  of  Atchison,  Kansas,  besides  those  who  were  next  day 
chosen  officers.  These  were  :  President,  General  John  A.  Dix ; 
Vice-President,  Thomas  C.  Durant;  Secretary,  H.  V.  Poor, 
and  Treasurer,  J.  J.  Cisco,  all  of  New  York.  Immediately  after 
organization  was  effected  men  were  put  to  work,  ground  being 
broken  at  Omaha  December  2,  1 863.3  The  sum  of  $218,000 
which  had  been  paid  in  on  stock-subscriptions  was  used  up,  and 
debts  contracted  for  from  $200,000  to  $300,000  more.  The  com¬ 
pany  was  so  hard  pressed  on  these  debts  that,  it  finally  resorted 
to  the  expedient  of  selling  part  of  the  materials  and  cars  to  raise 
funds.4 

The  line  as  first  projected  ran  west  from  Omaha,  but  as  heavy 
grades  would  thus  be  encountered,  a  somewhat  circuitous  route 
was  finally  settled  upon,  starting  south  from  the  city.5  Still  the 
first  thirty  or  forty  miles  were  expensive. 

As  this  section  of  the  road  approached  completion  it  was 
seen  that  New  York  capitalists  were  not  to  be  induced  to  put  the 
enterprise  through  ;6  work  must  soon  cease  for  lack  of  funds.  On 

1  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  599. 

2  Ibid.,  p.  579. 

3  Report  of  the  Directors  of  the  Union  Pacific  Railway  Company  for  1884. 

4  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  63. 

5  Ibid.,  p.  39- 

6  Ibid.,  p.  39. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


19 


May  12,  1864,  therefore,  a  committee  was  appointed  to  let  a  con¬ 
tract  for  building  one  hundred  miles  of  road.1 

The  enactment  of  the  Act  of  1864  followed  soon  after  this, 
doubling,  as  has  been  said,  the  funds  from  which  to  build  the  road. 

Even  then  the  friends  of  Durant  were  so  doubtful  of  the 
success  of  the  enterprise  that  they  availed  themselves  of  the  offer 
made  them  when  they  subscribed,  and  Durant  was  made  respon¬ 
sible  for  three-fourths  of  the  sum  ($2,000,000)  required  to  be 
subscribed  before  organization  was  authorized.2 

As  a  result  of  the  labors  of  the  committee  appointed  in  the 
preceding  May,  a  proposal  was  received  on  August  8,  1864,  from 
H.  M.  Hoxie,  to  build  one  hundred  miles  of  road  at  $50,000  per 
mile.  This  matter  was  arranged  at  New  York  between  Durant 
and  H.  C.  Crane,  who  acted  as  Hoxie’s  attorney.3  Crane  was 
intimately  connected  with  the  Union  Pacific  as  stockholder, 
director  and  otherwise;  Hoxie  was  an  employee  of  the  road. 
Oliver  Ames  says  distinctly  that  Hoxie  was  a  man  of  no  means,4 
of  no  responsibility.5  Still  Durant  declares  that  the  Hoxie  con¬ 
tract  was  made  in  good  faith.6  At  any  rate  it  was  accepted,7 and 
October  4,  1864,  Hoxie  proposed  its  extension  to  cover  the  line 
from  Omaha  to  the  one-hundredth  meridian.  This  proposal  was 
likewise  accepted.8  So  H.  M.  Hoxie,  whatever  his  financial  stand¬ 
ing  may  have  been,  stood  bound  to  construct  for  the  Union  Pacific 
Company  247^^  miles  of  road,  for  which  he  was  to  receive  over 
$12,000,000. 

Aside  from  the  relations  existing  between  Durant,  Crane  and 
Hoxie,  the  terms  of  the  contract  would  lead  one  to  suspect  that 
there  was  some  purpose  in  mind  other  than  that  which  appeared 

1  Forty-second  Congress,  third  session;  House  Report  No.  77,  February  18,  1873 
{Credit  Mobilier  Investigation — Mr.  Poland,  Chairman),  Testimony  taken  by  the  Com¬ 
mittee,  p.  365. 

2  Credit  Mobilier  Investigation ,  p.  388  ;  Affairs  of  the  Unio  n  Pacific  Railroad  Com¬ 
pany,  p.  515. 

3  Affairs  of  the  Union  Pacific  Railroad  Company,  part  2,  p.  2. 

4  Ibid.,  p.  256.  t  Ibid.,  part  2,  p.  4. 

s  Ibid.,  p.  285.  8  Ibid.,  part  2,  p.  4. 

6  Ibid.,  p.  69. 


20 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


on  the  face  of  the  matter.  The  contractor  was  specifically 
exempted  from  paying  more  than  $85,000  for  any  one  bridge;  the 
excess  in  price  of  iron  above  $130  per  ton  at  Omaha  was  to  be 
borne  by  the  Company  ;  if  required  to  Burnetize1  ties,  an  additional 
16  cents  per  tie  was  to  be  paid;  and,  most  important,  acceptance 
of  the  contract  bound  the  contractor  to  subscribe,  or  cause  to  be 
subscribed  to  the  capital  stock  of  the  Union  Pacific,  $500, 000.2 

As  early  as  September  30,  1864,  that  is,  some  time  before  its 
extension  had  been  voted,  Hoxie  had  agreed  with  Durant  to 
assign  his  contract  to  such  parties  as  he  (Durant)  might  desig¬ 
nate.  October  7,  1864,  an  agreement  was  drawn  up  binding  its 
signers  to  take  the  contract  from  Hoxie  and  to  subscribe  for 
carrying  it  out  the  sum  of  $1,600,000.  This  liability  was  divided 
as  follows :  Thomas  C.  Durant,  $600,000 ;  C.  S.  Bushnell, 
$400,000;  Charles  A.  Lambard,  $100,000;  H.  S.  McComb, 
$100,000  ;  H.  W.  Gray,  $200,000  ;  etc.3  According  to  the  terms 
of  the  agreement  one-fourth  of  the  sums  subscribed  was  paid  in, 
$400,000  in  all,  and  this  amount  was  used  on  the  road.  The 
men  who  had  assumed  the  Hoxie  contract  now  stood  in  the  rela¬ 
tion  of  partners,  liable  not  only  for  the  sums  subscribed,  but  to 
the  extent  of  their  fortunes.  Some  of  them  became  fearful  and 
concluded  that  it  would  be  better  to  lose  the  sums  already  sunk 
in  the  enterprise  than  to  go  on  and  take  greater  risks.4  They 
therefore  failed  to  respond  to  the  call  for  the  second  installment 
of  their  subscriptions.5 

About  this  time,  August  1865,  an  important  step  was  taken 
in  getting  the  brothers,  Oakes  and  Oliver  Ames,  to  take  hold  of 
the  project.6  Oakes  Ames  had  become  interested  in  the  Pacific 
railway  while  a  member  of  the  Committee  on  Railroads  in  the 
House  of  Representatives,7  and  his  personal  influence  in  Massa- 

1 A  process  by  which  cottonwood  ties  were  made  more  durable. 

2  Affairs  of  the  Union  Pacific  Railroad  Company,  part  2.  p.  2. 

3 Ibid.,  part  2.  p.  5. 

4  Ibid.,  p.  64,  and  Credit  Mobilier  Investigation,  p.  365. 

5  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  365. 

6  Ibid.,  p.  4. 

7  Oakes  Ames  Memoir,  p.  5. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


21 


chusetts,  together  with  his  great  financial  strength,  made  him  a 
valuable  ally  of  those  who  had  started  the  road.  Plans  for  pro¬ 
ceeding  were  again  discussed,  and  it  was  agreed  that  the  only 
feasible  way  to  enlist  the  necessary  capital  was  to  make  use  of  a 
construction  company.  The  scheme  of  building  railways  by  con¬ 
struction  companies  organized  among  the  stockholders  was  not 
new ;  it  had  been  tried  successfully  in  Iowa.1  Exhaustive  con¬ 
tracts  were  not  a  new  device.2  So  all  the  Union  Pacific  people 
had  to  do  was  to  adapt  to  their  own  uses  methods  which  others 
had  elaborated. 

It  having  been  decided  to  make  use  of  a  construction  com¬ 
pany,  an  examination  of  charters  followed.  This  led  to  the 
rejection  of  one  which  Bushnell  had  bought  in  Connecticut,3  and 
to  the  choice  of  a  Pennsylvania  corporation  as  better  meeting 
their  needs.  This  was  the  Pennsylvania  Fiscal  Agency,  which 
had  been  chartered  to  build  railways  in  the  South  and  West4 
by  an  act  of  the  state  legislature  of  Pennsylvania,  approved 
November  I,  1859. 5  On  the  fifth  of  the  same  month  books 
had  been  opened  in  Philadelphia  and  stock  subscribed  for.6 
Later  it  became  known  that  the  organization  then  effected  was 
irregular,  and  it  was  treated  as  a  nullity.7  May  29,  1863,  books 
were  again  opened,  stock  subscribed,  the  required  per  cent,  paid 
in,  and  organization  properly  effected.8  March  2,  1864,  Durant 
opened  negotiations  for  the  purchase  of  the  charter-rights  of  the 
Fiscal  Agency,  and  on  the  following  day  the  bargain  was  closed, 
Durant  paying  to  the  original  subscribers  what  they  had  invested, 
they  assigning  their  stock.9  Previous  to  this  time  there  had 
been  no  connection  whatever  between  the  men  of  the  Union 
Pacific  and  of  the  Fiscal  Agency. 

On  March  26,  1864,  an  amendatory  act  changed  the  name 
from  the  Pennsylvania  Fiscal  Agency  to  the  Credit  Mobilier  of 

1  Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  164. 

2  Ibid.,  p.  420.  3  Ibid.,  p.  39. 

4  Credit  Mobilier  Investigation,  p.  199. 

5  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  7. 

6 Ibid.,  p.  144.  8  Ibid.,  p.  146. 

7  Ibid.,  p.  146.  9 Ibid.,  p.  147. 


22 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


America,1  and  as  such  it  later  became  widely  known.  Thus  the 
Credit  Mobilier  became  an  adjunct  of  the  Union  Pacific  Railroad 
Company. 

The  reason  for  securing  such  a  company  as  the  Credit  Mobilier 
is  obvious.  No  firm  could  be  induced  to  undertake  the  building 
of  the  road  if  each  member  was  liable  to  the  extent  of  his  prop¬ 
erty.2  The  risk  was  too  great.  But  it  was  believed  that  if  a 
company  was  secured  in  which  the  liability  was  limited  to  the 
amount  of  the  subscription  to  stock,  as  in  the  Credit  Mobilier, 
capital  could  be  enlisted.  This  proved  to  be  the  case,  and  the 
necessary  funds  were  quickly  subscribed. 

As  a  matter  of  convenience  the  offices  of  the  Credit  Mobilier 
were  to  be  in  New  York,  where  the  headquarters  of  the  railway 
were  located,  but  under  the  terms  of  its  charter  it  could  not  cease 
to  be  a  Pennsylvania  corporation.  To  get  around  this  difficulty, 
the  device  of  a  New  York  branch  was  resorted  to.  The  cor¬ 
porate  existence  of  the  Credit  Mobilier  was  maintained  in  Penn¬ 
sylvania,  the  board  of  directors,  the  officers,  and  the  executive 
committee  being  elected  at  meetings  held  in  Philadelphia.  This 
executive  committee  then  chose  from  among  the  stockholders  of 
the  Credit  Mobilier  and  of  the  Union  Pacific,  a  number  of  men 
to  constitute  what  they  called  a  railway  bureau.3  This  body  had 
its  office  in  a  room  adjoining  the  offices  of  the  Union  Pacific.4 
The  executive  committee  attended  to  all  the  larger  fiscal  trans¬ 
actions,  while  the  railway  bureau  had  charge  of  the  construction 
of  the  road,  payments  for  work,  and  other  details.5  Under  this 
arrangement  the  work  progressed  satisfactorily.  Part  of  the 
necessary  capital  of  the  Credit  Mobilier  was  secured  by  trans¬ 
ferring  to  its  books  the  subscriptions  which  had  been  made  for 
carrying  out  the  Hoxie  contract  by  the  men  who  assumed  it.6 
They  were  relieved  of  their  former  obligations  by  the  transfer 
of  the  Hoxie  contract  to  the  corporation  of  which  they  had 
just  become  stockholders.  This  change  was  made  March  15, 

1  Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  9. 

2 Ibid.,  pp.  39-40.  4 Ibid .,  p.  153. 

3  lin'd.,  pp.  148,  1 31.  3  Ibid.,  p.  148. 

6  Credit  Mobilier  Investigation,  p.  366. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


23 


1 865  ,T  some  six  months  after  they  had  taken  the  contract  off 
Hoxie’s  hands.  The  transferred  subscriptions,  $1,600,000,  were 
supplemented  by  others,  securing  for  the  Credit  Mobilier  a 
working  capital  of  upwards  of  $2, 000, 000, 2  and  the  work,  which 
otherwise  must  have  stopped  within  sixty  days,  was  pushed 
vigorously.3 

But  note  how  incongruous  was  this  arrangement.  The  Credit 
Mobilier  was  nominally  a  Pennsylvania  corporation,  while  at  the 
Pennsylvania  office  no  business  was  done.  The  New  York  con¬ 
cern  was  in  form  only  a  branch  of  the  Pennsylvania  corporation, 
yet  it  transacted  all  the  business  which  the  Credit  Mobilier  ever 
had.  The  Union  Pacific  Railroad  was  being  built,  not  by  the 
Union  Pacific  Company,  but  by  the  Credit  Mobilier,  and  the  Union 
Pacific  officers  simply  got  the  resources  into  available  shape  and 
turned  them  over  to  the  Credit  Mobilier.  The  United  States 
bonds  it  sold  and  transferred  the  cash.  Sometimes  it  turned 
over  the  proceeds  of  the  sale  of  first-mortgage  bonds,  sometimes 
the  bonds  themselves. 

This  state  of  affairs  was  in  part  due  to  the  unfortunate  loose¬ 
ness  with  which  the  Pennsylvania  legislature  had  framed  the 
Credit  Mobilier  charter.  The  practice  of  granting  charters  con¬ 
taining  almost  no  limitations  was  at  that  time  common.  Unfor¬ 
tunately  it  is  not  yet  unknown. 

Under  the  new  impulse  which  the  Credit  Mobilier  gave  to  the 
enterprise,  the  work  of  construction  was  carried  forward  so 
rapidly  that  during  the  year  1866  the  government  passed  upon 
and  accepted  270  miles  of  track  as  meeting  the  requirements  of 
the  law. 

•  About  the  time  when  the  road  had  reached  the  one-hundredth 
meridian,  quite  a  number  of  the  stockholders  of  the  Credit 
Mobilier  had  become  large  stockholders  of  the  Union  Pacific, 
among  them  Mr.  Ames,  Mr.  Dillon,  and  Mr.  Duff.  Naturally 
they  desired  to  be  represented  on  the  Union  Pacific  board,  and 

1 Affairs  of  the  Union  Pacific  Railroad  Company,  p.  64. 

2  Credit  Mobilier  Investigation,  p.  366. 

3  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  659. 


24 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Oliver  Ames  and  two  or  three  others,  at  the  election  of  October 
3,  1866,  went  into  the  directory  of  the  Union  Pacific.1  From 
this  time  on  there  were  two  factions  among  the  Union  Pacific 
people,  one  headed  by  Durant,  the  other  by  Oakes  Ames. 
Durant’s  claim  to  leadership  lay  in  the  importance  of  what  he 
had  already  accomplished.  Ames  had  yet  to  win  his  spurs.  It 
has  repeatedly  been  said  that  the  struggle  between  Durant  and 
Ames  was  due  to  their  different  views  as  to  the  Union  Pacific 
enterprise  and  their  different  motives  in  taking  it  up.  Durant  is 
said  to  have  believed  that  the  road  would  be  a  commercial 
failure,  and  that  the  only  money  to  be  made  out  of  it  was  to  be 
made  on  construction  contracts  ;  while  Ames  believed  in  the 
future  of  the  road  and  looked  to  the  legitimate  business  of  the 
road  after  its  completion  for  his  profit.  The  evidence  as  to  con¬ 
tracts  made  by  these  men  for  construction,  however,  does  not 
exhibit  any  great  rapacity  on  Durant’s  part,  nor  any  great  ten¬ 
derness  toward  the  road  on  Ames’s  part.  It  seems  that  the  fric¬ 
tion  between  these  men  was  rather  of  a  personal  nature.  Durant 
carried  the  enterprise  as  far  as  his  resources  would  allow,  and 
then  had  to  give  way  to  Ames.  Whoever  had  succeeded  him  as 
leader  would  probably  have  aroused  Durant’s  jealousy  and  had 
his  opposition  to  contend  with. 

Be  that  as  it  may,  the  decided  friction  between  the  two 
parties  manifested  itself  repeatedly  when  the  letting  of  contracts 
was  under  discussion,  and  the  execution  of  several  engagements 
which  had  been  formally  entered  into  was  prevented.  Of  this 
sort  were  five  which  deserve  attention.  Their  history  shows  the 
internal  difficulties  of  the  company,  which  were  at  times  so 
serious  as  to  carry  the  questions  into  court.  It  also  shows  the 
evolution  of  the  terms  of  the  contract  under  which  the  most 
difficult  parts  of  the  road  were  built,  the  Ames  contract. 

The  first  of  these  never-executed  agreements  is  known  as  the 
Boomer  contract.^  Late  in  1866  Durant  made  a  contract  with 

1 Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  598. 

2  On  the  books  it  is  called  the  Gessner  contract.  Boomer  appointed  Gessner  his 
agent  and  later  sold  the  contract  to  him. — Affairs  of  the  Union  Pacific  Railroad  Com¬ 
pany,  p.  69. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


25 


L.  B.  Boomer,  of  Chicago,  which  called  for  the  building  of  150 
miles  of  road,  beginning  at  the  one-hundredth  meridian.  East 
of  the  North  Platte  River  the  price  stipulated  was  $19,500  per 
mile,  exclusive  of  equipment.  The  bridge  over  that  stream  was 
to  be  paid  for  at  actual  cost.  West  of  the  river  the  price  was 
$20,000  per  mile.  By  paying  for  work  already  done  and  giving 
ten  days’  notice,  Durant  could  at  any  time  terminate  this  arrange¬ 
ment.1  President  Dix,  Treasurer  Cisco,  and  other  conservative 
members  of  the  board  sustained  Durant  in  his  action  in  regard  to 
this  contract,2  but  it  was  never  approved  by  the  board  as  a 
whole.3  Oliver  Ames  afterward  declared  that  the  Boomer  con¬ 
tract  was  a  secret  arrangement,  a  bogus  thing  of  Dr.  Durant’s, 
and  that  Boomer  was  a  man  of  no  responsibility.4  At  any  rate, 
the  Credit  Mobilier,  although  it  had  received  no  new  contract, 
continued  to  build  the  road  west  of  the  one-hundredth  meridian 
precisely  as  it  had  done  east  of  that  point.  This  was  done  in 
expectation  of  another  contract  on  the  same  terms  as  the  Hoxie 
contract,  and  as  the  stockholders  of  the  Credit  Mobilier  and  of 
the  Union  Pacific  were  the  same  persons  5  this  expectation  was 
not  likely  to  prove  without  foundation. 

Durant’s  move  in  regard  to  the  Boomer  contract  having  been 
successfully  met,  the  next  one  was  made  by  the  other  side. 
There  was  presented  to  the  board  of  directors  of  the  Union 
Pacific,  on  the  5th  of  January  1867,  a  resolution  extending  the 
Hoxie  contract  to  the  point  then  completed,  namely,  305  miles 
west  of  Omaha,  and  authorizing  the  officers  to  settle  with  the 
Credit  Mobilier  for  the  added  58  miles  at  $50,000  per  mile.  By 
a  vote  of  eight  to  four  the  resolution  was  passed.6  According  to 
the  Act  of  1 864,7  the  President  of  the  United  States  appointed 
five  members  of  the  board  of  directors  of  the  Union  Pacific  who 
should  protect  the  interests  of  the  government.  The  four  votes 
against  the  extension  of  the  Hoxie  contract  were  cast  by  gov- 

1  Affairs  of  the  Union  Pacific  Railroad  Company ,  part  2,  p.  7. 

2  Credit  Mobilier  Investigation ,  p.  368. 

3  Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  67. 

4 Ibid .,  p.  285.  6  Ibid.,  p.  67. 

5  Ibid.,  p.  284.  7  Section  13,  p.  1 1 3,  below. 


26 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


ernment  directors,  one  voting  in  favor  of  it.1  Durant,  who  was 
absent  on  necessary  business  of  the  company  when  this  resolu¬ 
tion  was  passed,  entered  a  protest  against  its  being  carried  out, 
and  also  served  an  injunction  on  the  officers  to  prevent  their 
making  the  proposed  payments.  His  objections  were  that, 
although  the  Hoxie  contract  was  originally  let  in  good  faith,  no 
one  being  interested  in  it,  the  Credit  Mobilier  and  the  Union 
Pacific  had  since  become  identical  in  interest,  and  that  this  exten¬ 
sion  was  simply  letting  a  contract  to  themselves  ;  that  no  new 
subscriptions  to  the  Union  Pacific  stock  were  required  because  of 
this  extension ;  that  this  strip  of  road,  built  at  much  less  cost 
than  the  proposed  price,  had  been  accepted  by  the  government 
as  completed,  and  so  that  carrying  out  this  contract  would  entail 
heavy  loss  upon  the  company,  as  the  actual  cost  of  this  part  of 
the  road,  when  fully  equipped,  was  about  $27,500  per  mile.  Jan¬ 
uary  24,  nineteen  days  after  its  passage,  the  order  to  extend  the 
contract  was  rescinded.2 

The  condition  of  the  finances  of  the  two  closely  allied  corpo¬ 
rations  made  it  necessary,  early  in  1867,  earnestly  to  attempt 
measures  of  betterment.  One  form  which  this  effort  took  is 
shown  by  a  letter  of  February  13.  The  Credit  Mobilier  proposed 
to  purchase  of  the  Union  Pacific,  land-grant  bonds  to  the  amount 
of  $3,000,000,  at  80  ;  first-mortgage  bonds  to  the  amount  of 
$2,060,000  at  85  ;  certificates  convertible  into  first-mortgage  bonds 
to  the  amount  of  $750,000,  at  80,  these  certificates  to  bear  6  per 
cent,  interest  until  exchanged.  The  Credit  Mobilier  further  pro¬ 
posed  to  loan  or  procure  to  be  loaned  to  the  Union  Pacific 
$1,250,000  on  four  months’  time,  at  7  per  cent,  annual  interest 
and  2  y2  per  cent,  commission,  with  first-mortgage  bonds  at  66^3 
per  cent,  as  security.  On  the  other  hand,  the  Union  Pacific  was 
to  pay  to  the  Credit  Mobilier  the  balances  due  on  previous  debts 
at  least  as  soon  as  the  Credit  Mobilier  had  paid  for  the  securities 
named  above.  It  was  also  provided  that  the  Hoxie  contract 
should  be  extended  100  miles  west  of  the  one-hundredth  merid- 

1  Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  67. 

i  Ibid.,  pp.  68-70. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


27 


ian  at  $42,000  per  mile.1  This  arrangement  would  have  given 
the  Union  Pacific  $6,001,000  of  ready  funds.  As  the  contract 
price  was  considerably  in  excess  of  what  this  part  of  the  road 
was  actually  costing,  it  would  have  given  the  Credit  Mobilier  a 
profit  in  hand  on  that  part  of  the  100  miles  of  road  which  had  at 
that  time  been  completed,  and  an  inconsiderable  risk  on  the 
remainder  of  what  the  contract  covered.  The  executive  com¬ 
mittee  of  the  Union  Pacific  accepted  this  proposition,2  but  it  was 
not  carried  out. 

However,  an  understanding  was  reached  about  this  time  that 
whenever  a  contract  was  entered  into,  it  should  be  so  placed  that 
the  benefit  would  inure  to  the  stockholders  of  the  Credit  Mobi¬ 
lier.  On  the  strength  of  this  understanding  the  capital  stock  of 
the  Credit  Mobilier  was  increased.  This  was  originally  intended 
to  be  $2,000,000 ;  September  21,  1865, 3  it  was  made  $2,500,000 
nominally,  although  not  all  of  the  new  stock  was  taken  up  ;4  now, 
in  February  1867,  it  was  increased  to  $3,750,000.  The  difficulty 
in  getting  the  old  subscribers  to  take  this  new  stock  was  met  in 
this  way:  for  $1000  in  cash  there  was  promised  $1000  in  Credit 
Mobilier  stock  and  a  $1000  first-mortgage  bond  of  the 
Union  Pacific.  That  this  offer  would  prove  attractive  will 
appear  when  it  is  considered  that  the  first-mortgage  bonds  were 
then  worth  85,  thus  leaving  the  Credit  Mobilier  stock  to  represent 
15  per  cent,  of  the  price  paid.  On  these  terms  the  new  stock 
was  all  taken  and  the  cash  turned  over  to  the  Union  Pacific  in 
payment  for  bonds.  The  $1,250,000  thus  put  into  the  Union 
Pacific  treasury  was  used  to  cancel  a  part  of  the  $3,500,000  or 
$4,000,000  of  debt  which  it  then  owed.5 

Having  spent  this  sum,  things  came  to  a  standstill  again 
almost  as  bad  as  before.  The  Union  Pacific  then  allowed  Bush- 
nell  to  undertake  the  sale  of  a  large  block  of  first-mortgage  bonds 
which  it  had  on  hand  and  on  which  it  was  borrowing  money  at 

1  Credit  Mobilier  Investigation,  p.  17 1. 

2  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  172. 

3  Ibid.,  p.  78.  5  Ibid.,  p.  40. 

4  Ibid.,  p.  15. 


28 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


extravagant  rates  of  interest,  up  to  14J/2  per  cent.1  By  wide 
advertising  and  great  diligence  Bushnell  met  with  marked  sue- 
cess,  and  in  less  than  six  months  bonds  were  sold  to  the  amount 
of  $10,000,000,  the  price  being  put  up  from  90  to  95. 2  Thus  the 
financial  difficulties  were  removed. 

To  carry  out  the  tacit  agreement  made  in  February,  that 
the  Credit  Mobilier  stockholders  should  have  the  profits  on  con¬ 
structing  the  road,  attempts  were  made  to  let  contracts  direct  to 
that  corporation,  but  Durant  objected  on  account  of  the  identity 
of  the  two  organizations  and  twice  prevented  such  action  by 
injunctions.3 

One  of  these  attempts  gave  rise  to  what  is  known  as  the 
Williams  contract.  March  1,  1867,  John  M.  S.  Williams  pro¬ 
posed  to  the  company  to  take  the  building  of  267.57  miles  of 
road  westward  from  the  one-hundredth  meridian  as  the  initial 
point,  the  price  for  the  first  100  miles  being  $42,000  per  mile, 
for  the  remainder  $4,5,000  per  mile.  As  another  feature  of  the 
contract  Williams  was  to  bind  himself  to  procure  subscriptions 
for  Union  Pacific  stock  to  the  amount  of  $1,500,000.  The 
board  accepted  his  offer  and  gave  instructions  that  a  contract  be 
drawn  up  on  this  basis.  Williams  assigned  the  contract  to  the 
Credit  Mobilier,  and  the  Credit  Mobilier  accepted  the  assign 
ment.  Then  Durant,  on  March  27,  entered  a  protest  against 
letting  this  contract,  stating  as  grounds  that  part  of  the  road 
was  already  built  and  accepted  by  the  government,  that  the 
price  was  too  high,  that  no  time  limit  for  completing  the  work 
was  specified.  His  protest  was  backed  up  by  an  injunction,  so 
nothing  was  done  in  the  matter.  This  protest  shared  the  same 
fate  as  his  previous  one  —  both  were  expunged  from  the  minutes.4 

June  24,  1867,  Williams  again  made  a  written  proposal  to 
the  Union  Pacific.  It  was  this  :  To  build  the  road  from  the 
one-hundredth  meridian  to  the  base  of  the  Rocky  Mountains, 
267.52  miles,  at  $50,000  per  mile,  the  work  to  be  completed 


1  Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  41. 

2  Ibid .,  p.  42.  4  Ibid.,  pp.  70-I. 

3  Ibid.,  p.  41. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


29 


before  January  1,  1868.  The  provision  for  a  stock  subscription 
was  omitted  this  time.  Another  proposal  accompanying  this 
one  was  to  assign  the  contract,  if  received,  to  the  Credit  Mobi- 
lier.1  The  June  proposal,  like  the  one  made  in  March,  came  to 
naught.  This  ends  the  series  of  failures  at  contract-making. 

It  had  been  anticipated  that  great  difficulty  and  heavy  expense 
would  be  met  in  crossing  the  Rocky  Mountains,  but  during  1867 
it  became  generally  known  that  there  was  an  easy  route  by  way 
of  the  Black  Hills,  requiring  no  grade  heavier  than  ninety  feet  to 
the  mile,  and  knowledge  of  this  fact  greatly  strengthened  confi¬ 
dence  in  the  completion  of  the  road.  This  route  lay  through 
what  had  previously  been  called  the  Cheyenne  Pass,  Cheyenne 
and  Sherman  being  located  there.  From  this  time  on  it  was 
called  the  Evans  Pass,  it  having  been  discovered  by  an  engineer 
named  Evans,  acting  under  the  guidance  of  the  chief  engineer  of 
the  road,  General  Dodge.2 

Meanwhile  construction  was  being  pushed.  The  Hoxie  con¬ 
tract  had  been  completed  to  the  one-hundredth  meridian  October 

1  Affairs  of  the  Union  Pacific  Railroad  Company,  pp.  162-3. 

2 The  way  in  which  this  pass  was  located  is  interesting.  General  Dodge  says: 
“  Of  course  the  key  to  any  line  crossing  the  continent  is  the  crossing  of  the  Rocky 
and  other  mountains.  As  you  know,  they  are  the  Black  Hills,  the  divide  of  the  conti¬ 
nent,  the  Wasatch  Mountains,  the  Humboldt  and  the  Cascade.  The  line  east  of  the 
Rocky  Mountains  was  entirely  controlled  by  where  we  could  cross  those  mountains. 
It  took  several  years  before  we  could  discover  that  point.  It  was  finally  discovered  by 
my  running  what  was  known  as  a  foot  line  at  the  base  of  the  mountains,  from  the 
Laramie  River  to  the  south,  and  a  summit  line  at  the  top  of  the  mountain,  and  finding 
the  lowest  point  in  the  summit  and  the  highest  point  in  the  plains.  That  happened  to 

be  at  Sherman  and  Cheyenne .  That,  of  course,  controlled  the  line  from  the 

Rocky  Mountains  east  to  the  Missouri  River.” — Fiftieth  Congress,  first  session  ;  Sen¬ 
ate  Executive  Documents,  No.  51  {Report  of  the  Commission  and  of  the  Minority  Com - 
missioner  of  the  United  States  Pacific  Railway  Commission  Appointed  by  the  Act  of 
Congress  Approved  March  j>,  1887. — R.  E.  Pattison,  Chairman),  p.  3792. 

Just  when  the  character  of  the  Evans  Pass  became  known  to  the  builders  of  the 
Union  Pacific  cannot  be  said.  An  engineer’s  report  of  November  23,  1866,  spoke  very 
accurately  about  it.  One  of  the  directors,  Mr.  Williams,  was  thoroughly  acquainted 
with  both  the  engineer’s  reports  and  the  country  through  which  the  road  ran.  Durant 
also  knew  the  reports  pretty  well.  But  Bushnell,  who  on  the  whole  was  very  well 
informed  as  to  the  affairs  of  the  Union  Pacific,  says  he  does  not  think  any  other  mem¬ 
ber  of  the  board  knew  anything  about  the  matter  until  late  in  1867.  It  would  be  inter¬ 
esting  to  know  whether  or  not  knowledge  of  this  easy  route  came  before  the  letting  o 


30 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


5,  1866,1  and  beyond  that  point  the  Union  Pacific  made  all  its 
bargains  for  work  subject  to  any  future  contract  which  might  be 
let.3  By  August  16,  1867,  188  miles  more  had  been  built,3  and 
a  letter  of  that  date  from  Oakes  Ames  proposed  the  terms  on 


which  he  would  become  responsible  for  building  the  667  miles  of 


road  beginning  at  the  one -hundredth  meridian.4  The  board 


passed  a  resolution  the  same  day  directing  the  officers  to  obtain 


the  written  consent  of  the  stockholders,  a  provision  upon  which 
Durant  insisted,5  and  then  to  ratify  the  contract,  giving  Ames  the 


option  of  extending  it  westward  to  Salt  Lake  if  he  chose.6  The 


prices  specified  were  :  100  miles  at  $42,000  per  mile,  167  at  $45,- 
000,  100  at  $96,000,  100  at  $80,000,  100  at  $90,000,  100  at  $96,- 
000. 7  Thus  Ames  assumed  a  contract  aggregating  $47,915,000. 

These  prices,  although  high  for  the  eastern  sections  of  the 
part  which  they  covered,  were,  on  the  whole,  perhaps  not  exor¬ 
bitant.  The  rates  for  the  western  sections  would  undoubtedly 
have  been  made  considerably  higher  if  the  eastern  part  with  its 
assured  profit  had  not  been  included.  Moreover,  this  contract 
insured  the  building  of  the  difficult  portions  by  providing  that 
when  the  proceeds  of  the  bonds  were  not  sufficient  to  pay  the 
contract  prices,  the  contractor  should  subscribe  for  enough  stock 
to  furnish  the  money  for  paying  the  balance.  In  other  words, 
Ames  was  bound  to  take  in  stock,  at  par,  that  part  of  his  pay 
which  was  not  produced  by  selling  the  two  kinds  of  bonds.  In 
no  other  way  could  security  have  been  obtained  for  the  building 
of  the  difficult  and  risky  portions  of  the  road.  In  fact,  it  was 
impossible  to  let  contracts  to  outsiders  for  even  the  easy  portions 
of  the  road.  John  Duff,  who  had  done  a  great  deal  of  work  of 

the  next  contract  which  we  have  to  consider,  the  most  important  one  of  all  which  were 
made.  But  unfortunately  definite  information  as  to  this  date  is  not  forthcoming. — 
Affairs  of  the  Union  Pacific  Railroad  Company,  pp.  42,  43,  85,  92,  238,  239,  252-3,  508, 
550-I,  651. 

1  Affairs  of  the  Union  Pacific  Railroad  Company ,  p.  65. 

*  Ibid.,  p.  1 1 5.  3  Ibid.,  p.  113. 

*  Credit  Mobilier  Investigation,  p.  365. 

s  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  542. 

6  Ibid.,  part  2.  p.  12.  7  Ibid.,  p.  10. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


31 


this  sort,  made  repeated  efforts  to  let  contracts  among  experi¬ 
enced  and  competent  contractors,  appealing  to  his  own  sub-con- 
tractors  in  his  attempts  to  find  some  one  who  would  do  the  work, 
but  he  was  unable  to  get  anyone  to  go  out  there.1  Horace 
Clarke  said,  in  1873,  that  he  thought  the  Ames  contract  the  wild¬ 
est  contract  he  ever  knew  to  be  made  by  a  civilized  man.2  Be 
that  as  it  may,  the  work  was  pushed  to  completion  under  it. 

Although  this  contract  did  not  intimate  in  its  terms  that  any¬ 
one  besides  Oakes  Ames  and  the  Union  Pacific  Railroad  Com¬ 
pany  was  in  any  way  concerned  in  the  matter,  there  undoubtedly 
existed  a  more  or  less  definite  understanding  that  the  persons  to 
profit  thereby  were  the  stockholders  of  the  Credit  Mobilier.3  The 
arrangement  by  which  the  profits  were  distributed  to  them  is 
described  in  the  tripartite  agreement,  which  was  signed  October 
15,  1 867. 4  General  Benjamin  F.  Butler  suggested  this  form  of 
contract  as  obviating  the  difficulty  which  would  arise  if  any  single 
stockholder  of  the  Credit  Mobilier  should  object  to  the  transfer 
of  responsibility  to  that  organization.5  The  party  of  the  first 
part  was  Oakes  Ames,  who  then  held  the  contract,  and  who 
assigned  it  to  the  party  of  the  second  part.  Seven  trustees  con¬ 
stituted  the  party  of  the  second  part,  and  they  bound  themselves 
to  carry  out  the  contract  according  to  its  terms,  and  to  distribute 
the  profits  thereupon  among  those  stockholders  of  the  Credit 
Mobilier  who  should  execute  to  them  an  irrevocable  proxy  on  at 
least  six-tenths  of  any  Union  Pacific  stock  which  they  then 
owned,  or  which  they  in  future  might  own.  This  power  to  vote 
a  majority  of  the  Union  Pacific  stock  insured  the  trustees  against 
the  election  of  a  Union  Pacific  board  hostile  to  the  interests  of 
the  Credit  Mobilier.  The  men  named  as  trustees  were  Oliver 
Ames,  T.  C.  Durant,  J.  B.  Alley,  Sidney  Dillon,  C.  S.  Bushnell, 
H.  S.  McComb,  and  Benjamin  E.  Bates.  The  party  of  the  third 
part  was  the  Credit  Mobilier,  which  guaranteed  the  carrying  out 
of  the  contract  and  bound  itself  to  loan  the  trustees  what  funds 


1  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  493. 

2  Ibid.,  p.  405.  4  Ibid.,  part  2.  pp.  13-16. 

Ibid.,  p.  5.  s  Ibid.,  p.  684. 


32 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


they  needed,  receiving  therefor  7  per  cent,  interest  and  2  y2  per 
cent,  commission. 

Noteworthy  changes  in  the  standing  of  the  Union  Pacific 
enterprise  had  taken  place  since  1864.  Then  the  Credit  Mobilier 
had  to  be  secured  in  order  to  limit  liability  and  get  enough  cap¬ 
ital  to  continue  construction.  In  1868  there  was  no  difficulty  in 
getting  capital  to  take  hold  of  the  Ames  contract.  The  proxies 
which  were  required,  and  which  were  readily  given  to  the  trustees, 
were  so  worded  that  they  made  each  stockholder  of  the  Credit 
Mobilier  a  partner  in  the  enterprise — just  what  the  Credit 
Mobilier  had  been  made  use  of  to  avoid  —  and  the  trustees  went 
to  work  with  $50,000,000  back  of  them.  Until  the  connection 
of  the  Credit  Mobilier  with  the  Ames  contract  was  known,  the 
stock  of  that  corporation  had  never  had  a  market  value.  Then  it 
immediately  went  far  above  par,  and  what  few  sales  were  made 
were  at  fancy  figures  like  260. 

As  has  already  been  said,  the  Credit  Mobilier  continued  to 
build  the  road  beyond  the  one-hundredth  meridian,  where  its 
contract  ceased,  knowing  that  proper  credit  for  its  work  would 
be  given  when  the  final  contract  was  let.  We  have  seen  that 
when  Ames’s  proposal  was  made,  188  miles  had  already  been 
built.  By  the  time  he  assigned  the  contract  to  the  trustees,  50 
miles  more  had  been  finished.1  This  first  part  of  the  work 
embraced  under  the  Ames  contract  was  not  expensive,  and  what 
was  to  be  paid  for  it  was  some  $2,500,000  or  $3,000,000  in  excess 
of  its  cost  to  the  builder.2  So  the  trustees,  with  this  sum  in  hand, 
made  haste  to  carry  out  their  obligations. 


miles  which  it  originally  covered,3  Durant,  to  avoid  delay,  made 
a  contract  in  November  1868,  with  James  W.  Davis,  a  sub-con¬ 
tractor,  to  build  the  remainder  of  the  road.  The  Davis  contract 
took  the  Ames  contract  as  its  basis,  and  an  accompanying  agree¬ 
ment  provided  for  its  assignment  to  the  same  trustees  who  exe¬ 
cuted  the  Ames  contract.  A  resolution  of  the  board  of  directors 


1 Affairs  of  the  Union  Pacific  Railroad  Company,  p.  114. 

2  Ibid.  3  Ibid.,  p.  4. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


35 


of  the  Union  Pacific  approved  Durant’s  action,  and  a  committee 
was  appointed  to  obtain  the  necessary  consent  of  the  Union 
Pacific  stockholders.1  Thus  without  any  change  of  machinery 
the  work  went  on. 

Construction  on  the  western  part  of  the  road  was  pushed 
with  unprecedented  vigor,  winter  not  being  allowed  to  stop  work. 
There  were  several  reasons  for  this  haste.  Public  opinion,  which 
the  government  directors  voiced,  urged  it.2  To  put  capital  into 
the  road  and  postpone  its  productiveness  by  not  opening  it  to 
traffic  until  1875,  the  limit  set  by  the  Act  of  1864,  would  have 
crushed  the  company  under  the  accumulation  of  interest.  The 
Salt  Lake  business  and  a  “governing  point”  for  the  traffic  of 
that  region  was  a  prize  to  be  gained  only  by  rapid  work.3  Late 
in  the  construction  period  the  desire  to  meet  the  Central  Pacific 
as  far  west  as  possible  became  a  motive.  So  the  work  was  done 
with  marvelous  speed.  Four  or  five  miles  of  track  were  laid  per 
day,  and  items  of  expense  which  should  have  been  $600  per  mile 
were  made  Si  500  instead.4 5 6 7 8 9 10 11  By  such  methods  the  Union  Pacific 
/and  the  Central  Pacific  were  joined  May  10,  1 869.5 

1 Affairs  of  the  Union  Pacific  Railroad  Company,  p.  17.  3  Ibid.,  p.  563. 

2 Ibid.,  p.  664.  ‘•Ibid.,  p.  510. 

s  The  facts  of  the  construction  period  thus  far  related  may  be  brought  together  by 
the  aid  of  the  accompanying  diagram  : 


Ogden  Omaha 

1042  935  515  400  347nnj  305  247ttht  ioo  35 


1.  Built  by  Union  Pacific  Company,  largely  with  Durant’s  money. 

2.  Hoxie  Contract. 

3.  Hoxie  Contract  extension. 

4.  Assigned  to  Credit  Mobilier. 

5.  Built  by  Credit  Mobilier. 

6.  First  proposed  extension  to  Hoxie  Contract. 

7.  Proposed  Hoxie  Contract  extension,  coupled  with  purchase  of  $6,000,000  of 
securities. 

8.  Boomer  Contract. 

9.  I.  Williams  Contract  of  March  1,  1867. 

II.  Williams  Contract  of  June  24,  1867. 

10.  Ames  Contract. 

11.  Davis  Contract. 


34 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


This  saving  of  six  years  of  the  time  allowed  by  the  law  for 
completing  the  road  doubled  the  cost  to  the  builders.  By 
increasing  the  working  force  the  chance  of  accidental  delays  was 
increased,  and  the  costliness  of  such  delays  likewise  increased. 
Just  before  the  Ames  contract  was  let,  the  Union  Pacific  was 
obliged  to  borrow  money  in  New  York  to  use  on  the  road,  for 
which  it  paid  1 8  or  19  per  cent.1  By  pushing  the  road  out  beyond 
the  bounds  of  civilization  and  not  waiting  for  the  slower  pace  of 
the  settler,  it  often  became  necessary  for  one-half  the  force  to 
stand  guard  while  the  other  half  worked.2  Hundreds  of  work¬ 
men  were  killed  by  the  Indians.3 

Thus  far  the  managers  of  the  enterprise  were  responsible  for 
the  increased  cost ;  they  could  have  avoided  it  by  adopting  a 
different  policy.  But  there  were  other  items  of  needless  cost 
which  they  could  not  avoid.  For  these  the  government  alone 
was  to  blame. 

The  requirement  that  only  American  iron  be  used  on  the  road 
increased  the  cost  $10  for  every  ton  of  rails  laid.4  An  incident, 
typical  rather  than  intrinsically  important,  is  that  of  two  govern¬ 
ment  directors  who  insisted  that  a  cut  should  be  made  through 
each  rise  in  the  Laramie  plains,  giving  the  track  a  dead  level, 
instead  of  conforming  it  to  the  profile  of  the  ground.  As  snow 
blockades  made  it  necessary  to  refill  these  cuts  later,  there  was  a 
waste  of  from  $5,000,000  to  $10,000,000.  At  the  crossing  of 
the  North  Platte,  machine  shops  were  called  for  which  cost  per¬ 
haps  $300,000.  To  the  company  they  were  not  worth  three 
cents.5  Another  of  a  worse  sort  concerned  a  government  com¬ 
missioner,  Cornelius  Wendell,  appointed  to  examine  the  road  and 
report  whether  or  not  it  met  the  requirements  of  the  law,  who 
flatly  demanded  $25,000  before  he  would  proceed  to  perform  his 
duty.  As  a  considerable  section  of  road  awaited  acceptance, 
and  as  acceptance  must  precede  the  drawing  of  subsidies,  his 

1  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  252. 

2  Ibid.,  p.  431.  3 Ibid.,  p.  494. 

4  Credit  Mobilier  Investigation,  p.  255. 

5  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  432. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


35 


demand  was  paid  in  the  same  spirit  in  which  it  was  made  —  as 
just  so  much  blood-money.1  Such  results  were  bound  to  follow 
when  the  government  made  its  power  to  appoint  commissioners 
a  means  of  distributing  political  patronage.2 

As  steps  toward  answering  the  question,  What  did  the  build¬ 
ing  of  the  Union  Pacific  yield  as  profit?  the  capitalization  and  the 
cost  must  be  considered. 

The  property,  at  the  close  of  the  period  of  construction,  stood 
burdened  with  four  kinds  of  bonds  —  United  States  bonds,  its  own 
first-mortgage  bonds,  land-grant  bonds,  and  income  bonds.  Of 
the  government  bonds  there  were  issued  the  full  quota  — 
$27,266,512  on  1038.68  miles  of  road.3  The  aggregate  of  first- 
mortgage  bonds  was  slightly  less  than  this  sum,  $27,2 13, 000. 4 
Of  land-grant  bonds  there  were  outstanding  $10,400,000,  and  of 
income  bonds,  $9,355,000.  Thus  the  total  indebtedness  repre¬ 
sented  by  the  four  kinds  of  bonds  was  $74,204,512. 

The  stock  of  the  road  subscribed  for  when  organization  was 
effected  was  slightly  in  excess  of  the  $2,000,000  required,5  and 
was  owned  in  various  quarters.  As  early  as  December  1,  1864, 
the  Credit  Mobilier  began  to  buy  in  these  shares,  and  succeeded 
in  acquiring  almost  all  of  them.6  By  the  time  the  Ames  contract 
was  let,  the  $2,000,000  had  increased  to  about  $5, 000, 000. 7  Under 
the  Ames  and  Davis  contracts  the  trustees  subscribed,  at  various 
times  as  the  work  proceeded,  according  to  the  terms  of  those 
contracts,  for  $30,096,000  of  stock,8  and  when  the  road  was  done 
the  stock  issued  was  $36,762,300.  Thus  the  total  capitalization 
of  the  road  was  $110,966,812. 

But  this  sum  does  not  represent  the  cost  of  the  road.  From 
the  books  of  the  Union  Pacific  and  the  Credit  Mobilier,  it  appears 
that  the  expenditures  by  the  Union  Pacific  directly  amounted  to 
$9,746,683.33  ;  and  that  the  actual  expenditures  under  the  Hoxie, 

1  Affairs  of  the  Union  Pacific  Railroad  Company,  p.  471. 

2 Ibid.,  p.  431.  6  Ibid.,  p.  20. 

3 Ibid.,  p.  738.  7  Ibid.,  p.  72. 

4  Ibid.,  p.  590.  8  Ibid.,  p.  642. 

5  Ibid.,  p.  599. 


36 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Ames,  and  Davis  contracts  were  $50,720,957.94,  making  the  total 
cost  of  the  road  $60, 467, 641. 27. 1 

This  should  be  compared  with  the  sum  received  for  bonds, 
which  is  shown  by  the  following  table  :2 


First-mortgage  bonds 
Loss  on  same . 

Land-grant  bonds  .  . 
Loss  on  same . 

Government  bonds.  . 
Loss  on  same . 

Income  bonds . 

Loss  on  same . 


$27,213,000.00 

3,494,99i-23 

10,400,000.00 

4,336,007.96 

27,236,512.00 

91,348.72 

9,355,000.00 

2,818,400.00 


$23,718,008.77 

6,063,992.04 

27,145.163.28 

6,536,600.00 


Total . 

Cost  of  road 


$63,463,764.09 

60,467,641.27 


Excess  of  receipts  from  bonds  over  cost  of  road. . 


$  2,993,122.82 


There  must  be  added  to  this  sum,  in  order  to  get  the  cash 
profit  on  building  the  road,  the  amount  which  was  paid  to  the 
Union  Pacific  by  the  Central  Pacific  for  the  section  of  road  lying 
between  Promontory,  which  had  been  settled  upon  as  the  meet¬ 
ing  place  of  the  two  roads,  and  the  point  which  is  now  the  end 
of  the  Union  Pacific,  some  four  or  five  miles  west  of  Ogden.3  For 
this  transfer  of  the  ownership  of  some  fifty  miles  of  road  the 

JThe  figures  upon  which  this  estimate  is  based  were  compiled  by  Mr.  Benjamin 
F.  Ham,  who  was  Assistant  Secretary  and  Treasurer  of  the  Credit  Mobilier  during 
most  of  the  period  of  its  active  existence. — Affairs  of  the  Union  Pacific  Railroad  Com¬ 
pany,  p.  371. 

2  Ibid.,  p.  590. 

3  Those  provisions  of  the  chartering  acts  which  were  intended  to  spur  the  eastern 
and  the  western  companies  to  rapid  building,  in  competition  for  the  subsidies  offered, 
worked  only  too  well.  Instead  of  bringing  the  ends  of  the  road  together  as  soon  as 
possible,  the  two  construction  parties  passed  within  sight  of  each  other,  and  graded 
two  parallel  lines.  The  Central  Pacific  went  almost  to  Ogden  and  the  Union  Pacific 
to  Humboldt — points  170  miles  apart — before  a  compromise  was  effected.  The  terms 
of  the  compromise  are  indicated  in  the  text. — Affairs  of  the  Union  Pacific  Railroad 
Company,  p.  II. 


BUILDING  AND  COST  OF  THE  UNION  PACIFIC. 


3  7 


Union  Pacific  received  the  sum  of  $2,698,620.  This  makes  the 
cash  profit  on  the  enterprise  $5,691,742.82. 

Then,  in  order  to  ascertain  the  total  profit  on  construction, 
there  must  be  added  the  value  of  the  whole  amount  of  stock 
issued.  But  what  that  value  is  cannot  be  said.  The  leading 
men  of  the  enterprise  seemed  unanimous  in  the  opinion  that  a 
fair  valuation  was  30.  But  Union  Pacific  stock  has  certainly 
been  above  that  point  repeatedly,  and  it  was  down  at  one  time 
to  9.  It  has  always  been  a  speculative  stock,  the  sales  amount¬ 
ing  in  a  year  to  several  times  the  total  amount  outstanding.  But, 
for  the  sake  of  getting  an  estimate  of  the  profits  made  by  the 
builders  of  the  Union  Pacific,  even  though  that  estimate  be 
admittedly  unreliable,  the  valuation  given  above  may  be  taken. 
At  30,  the  $36,762,300  of  stock  would  be  worth  $11,028,690. 
Adding  this  to  the  cash  profit  as  stated  above,  the  total  profit 
appears  to  be  $16,710,432.82,  or  slightly  above  2714  per  cent,  of 
the  cost  of  the  road.  Considering  the  character  of  the  under¬ 
taking  and  the  time  when  it  was  carried  through,  this  does  not 
seem  an  immoderate  profit. 


CHAPTER  IV. 


HISTORY  OF  THE  BRANCH  ROADS. 

While  the  Union  Pacific  was  filling  with  settlers  a  strip  of 
country  stretching  westward  from  Omaha,  the  other  roads  pro¬ 
vided  for  in  the  charter  acts  were  doing  the  same  for  other 
regions.  The  early  history  of  these  related  enterprises  must  be 
traced  as  a  basis  for  an  understanding  of  their  future  relations.1 
The  most  important  of  these  branch  roads  is  the  Kansas  Pacific, 
the  one  spoken  of  in  the  chapter  on  the  charter  acts  as  the  Kan¬ 
sas  branch. 

1  Here,  as  well  as  anywhere  else,  may  be  given  the  few  facts  necessary  to  an  under¬ 
standing  of  the  situation  concerning  the  line  which,  in  the  Act  of  1862,  it  was  proposed 
should  run  from  Sioux  City  to  join  the  Union  Pacific  at  the  one-hundredth  meridian. 
It  was  known  as  the  Sioux  City  and  Pacific. 

To  cross  the  Missouri  immediately  and  proceed  in  a  southwesterly  direction, 
would  have  given  the  whole  land  grant  in  Nebraska.  There  were  more  valuable  lands 
in  western  Iowa,  so  the  projectors  of  the  road  chose  a  course  slightly  east  of  south 
from  Sioux  City,  and  crossed  the  Missouri  at  a  point  only  a  little  way  above  Omaha. 
The  junction  with  the  Union  Pacific  was  at  Fremont,  a  small  town  lying  a  short  dis¬ 
tance  west  of  Omaha.  Besides  securing  a  more  valuable  land  grant  than  it  otherwise 
would  have  had,  the  company  thus  got  a  location  where  it  would  have  a  more  lucra¬ 
tive  traffic. 

John  I.  Blair  and  Oakes  Ames  were  the  leading  men  of  the  construction  period, 
and  their  profits  cannot  be  learned.  The  subsequent  financial  history  of  the  road  was 
unsatisfactory,  but  its  location  made  the  line  valuable  to  the  Chicago  and  North- 
Western,  and  in  1884  a  controlling  interest  in  the  stock  was  bought  by  that  company, 
of  which  it  has  since  been  an  appendage.  The  Sioux  City  and  Pacific  has  never  been  a 
part  of  the  Union  Pacific  system,  so  it  calls  for  no  further  attention. 

The  Central  Pacific,  although  it  is  not  a  part  of  the  system  whose  history  this 
work  attempts  to  trace,  is  so  closely  related  to  the  Union  Pacific,  both  in  origin  and 
commercially,  that  space  may  be  spared  for  the  merest  outline  of  its  history. 

The  Central  Pacific  Railroad  Company  was  organized  under  California  state  law 
in  1861.  It  formally  accepted  the  terms  offered  to  it  by  the  Act  of  1862,  and  work 
upon  the  road  began  January  8,  1863.  The  completion  of  the  task  was  of  course 
simultaneous  with  the  completion  of  the  Union  Pacific  —  May  10,  1869. 

The  company  was  organized  by  a  circle  of  Sacramento  merchants  —  Collis  P. 
Huntington,  Leland  Stanford,  Mark  Hopkins,  and  Charles  Crocker.  A  few  other 

38 


HISTORY  OF  THE  BRANCH  ROADS. 


39 


In  1 86 11  the  territorial  legislature  of  Kansas  granted  a 
charter  to  the  Leavenworth,  Pawnee  and  Western  Railroad  Com¬ 
pany.  At  that  time  it  was  not  uncommon  for  charters  to  be 
obtained  before  plans  for  using  them  were  fully  matured.  This 
was  a  case  of  that  kind,  and  consequently  the  charter  was  for 
some  time  unused.  The  scheme  of  this  corporation  was,  in  its 
inception,  to  build  a  road  only  from  Leavenworth  to  Lawrence. 
By  a  treaty  with  the  Delaware  Indians  some  225,000  acres  of 
land  lying  some  six  miles  from  Leavenworth  were  bought,  and 
then,  as  the  enterprise  was  found  to  be  too  small  to  attract  the 
attention  of  capitalists,  a  treaty  with  the  Pottawatamie  Indians 
was  made  which  secured  an  additional  right,  that  of  purchasing 
at  $1.25  per  acre  a  tract  of  land  which  lay  northwest  of  Topeka, 
containing  550,000  acres  more.  This  right,  however,  was  never 

parties  at  times  had  minor  interests  in  the  enterprise.  Having  once  taken  hold  of  the 
task  of  building  the  road,  these  men  stood  by  it  to  the  fullest  extent  and  put  it  through, 
never  disposing  of  the  stock  which  came  into  their  hands.  The  physical  difficulties  to 
be  overcome  were  much  greater  on  the  Central  Pacific  than  on  the  Union  Pacific — 
heavier  grades,  long  stretches  of  snow-sheds  through  the  mountains,  etc.,  being  required. 
As  the  Union  Pacific  profited  by  the  unexpected  finding  of  an  easier  route,  so  the  Cen¬ 
tral  Pacific  found  an  unexpected  resource  in  Chinese  cheap  labor,  without  which  the 
road  probably  could  not  have  been  built. 

The  construction  company  device  which  was  used  by  the  Central  Pacific  people 
was  called  the  Contract  and  Finance  Company,  and  was  similar  in  organization  to  the 
Credit  Mobilier.  The  number  of  men  concerned  being  smaller,  and  the  system  of 
bookkeeping  being  even  worse  than  the  bad  one  employed  by  the  Credit  Mobilier, 
the  history  of  the  construction  period  of  the  Central  Pacific  cannot  be  given.  But  at 
any  rate,  the  men  who  took  the  stupendous  risks  of  that  time  got  all  the  profits. 

The  same  men  who  composed  the  Central  Pacific  Company  also  made  up  the 
Southern  Pacific  Company.  The  road  of  the  latter  runs  southeast  from  San  Francisco 
to  New  Orleans,  and  thence  has  one  line  of  steamers  to  Florida  and  another  to  New 
York.  The  real  connection  between  the  Central  Pacific  and  the  Southern  Pacific  is 
very  simple  —  identity  of  ownership.  The  nominal  connection  has  been  in  various 
deceptive  forms.  The  Southern  Pacific  company  is  a  Kentucky  corporation,  with  ill- 
defined  and  almost  unlimited  powers.  Sometimes  the  Central  Pacific  has  leased  the 
Southern  Pacific  line  ;  now  the  Southern  Pacific  holds  a  lease  of  the  Central  Pacific 
line.  Naturally  it  is  to  the  interest  of  the  owners  of  these  systems  to  send  Coast 
traffic  over  the  Southern  Pacific  in  preference  to  sending  it  over  the  Central  Pacific 
and  the  Union  Pacific,  as  they  thus  secure  a  longer  haul.  How  the  Union  Pacific 
tried  to  recoup  itself  for  the  traffic  which  was  lost  to  it  when  the  Southern  Pacific  line 
was  built,  will  appear  later. 

XH.  V.  and  H.  W.  Poor,  Manual  of  Railroads ,  1877-78. 


40  HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 

exercised  and  these  lands  were  subsequently  sold  for  $1.00  per 
acre  to  parties  interested  in  the  Santa  Fe  Company.1  The  pro¬ 
ject  still  being  considered  too  insignificant,  it  was  determined  to 
connect  it  with  a  Pacific  railway  scheme,  and  thus  attract  the 
attention  of  the  whole  country.  The  parties  interested,  there¬ 
fore,  drew  up  and  pushed  in  Congress  one  of  the  early  Pacific 
railway  bills.2 

In  1863  the  name  of  the  company  was  changed  from  the 
Leavenworth,  Pawnee  and  Western  to  the  Union  Pacific  (Eastern 
Division).  In  May  1863,  John  C.  Fremont  and  Samuel  Hallett 
began  making  a  series  of  payments  which  in  October  amounted 
to  $203,000  and  gave  them  possession  of  the  franchises  and  the 
lands  of  the  company.  Of  this  latter  asset  there  were  supposed 
to  be  over  2,000,000  acres.3  Under  the  early  owners  there  had 
been  little  or  no  construction.  Under  Fremont  and  Hallett  a 
contract  was  let  to  a  Canadian  firm,  but  no  work  was  done  under 
it.4  Its  owners  becoming  estranged  in  1864,  the  property  was, 
in  December  of  that  year,  turned  over  to  a  new  set  of  men,  the 
price  being  about  the  same  sum  that  was  paid  at  its  previous 
transfer.5  Under  this  management  the  road  was  built. 

The  Eastern  Division  people,  doubting  that  the  Union  Pacific 
Company  would  ever  build  their  road  as  originally  planned,  were 
instrumental  in  having  inserted  in  the  Act  of  July  2,  1864,  a 
section6  which  provided  that,  if  the  line  from  Omaha  had  not 
been  constructed  when  the  Eastern  Division  reached  the  point 
of  the  proposed  junction  at  the  one-hundredth  meridian,  the 
latter  might  proceed  to  build  westward  on  the  proposed  route 
of  the  Union  Pacific  and  receive  the  subsidy  for  such  building. 
This  fact  is  interesting  when  considered  in  connection  with  the 
Act  of  July  3,  1 866. 7  In  this  is  found  evidence  of  a  change  in 
plan.  It  allowed  the  Eastern  Division  to  run  west  instead  of 
northwest,  releasing  it  from  the  necessity  of  joining  the  Union 

1 Pacific  Railway  Commission,  p.  1673. 

2  Ibid.,  p.  1596. 

3  Ibid.,  p.  3846. 

4  Ibid. 


5  Ibid.,  p.  3847. 

6  Sec.  12,  see  page  113  below. 

7  14  Statutes  at  Large,  79. 


HISTORY  OF  THE  BRANCH  ROADS. 


41 


Pacific  at  the  one-hundredth  meridian.  Under  this  authority 
the  old  route  up  the  Republican  fork  of  the  Kavv  was  aban¬ 
doned,  and  a  new  one  following  the  Smoky  Hill  branch  was 
adopted,  the  point  of  divergence  from  the  original  route  being 
Fort  Riley.  It  was  undoubtedly  the  intention  of  the  Eastern 
Division  people  to  extend  their  road  southwest  from  Denver, 
through  New  Mexico  and  Arizona  and  on  to  the  southern  part 
of  California.  They  would  thus  have  had  a  competitor  of  the 
Union  Pacific,  instead  of  a  branch  of  it.  This  plan,  however, 
was  frustrated  by  the  insertion  in  the  Act  of  1866  of  the  unwel¬ 
come  provision  that  the  Eastern  Division  must  join  the  Union 
Pacific  at  a  point  not  more  than  fifty  miles  west  of  the  meridian 
of  Denver. 

The  subsidy  was  claimed  on  the  first  completed  section  of 
forty  miles  in  October  1865.  A  year  later  130  miles  were 
done;  by  the  end  of  1868  about  400  miles  were  ready  for  opera¬ 
tion,  and  the  fall  of  1870  saw  the  line  opened  for  traffic  to 
Denver.1 

Meanwhile  an  Act  of  Congress  of  March  3,  1869, 2  had 
authorized  the  Eastern  Division  to  contract  with  the  Denver 
Pacific  Company  for  the  building  of  the  road  from  Denver  to 
Cheyenne,  and  there  was  transferred  to  that  company  the  fran¬ 
chise,  land  grant,  and  all  other  privileges  for  that  part  of  the 
road.  On  the  same  day  both  houses  of  Congress  passed  a 
joint  resolution  allowing  the  name  to  be  changed  from  Union 
Pacific  (Eastern  Division)  to  Kansas  Pacific.3  For  the  sake  of 
simplicity  the  road  will  be  referred  to  hereafter  by  this  name, 
without  regard  to  what  may  have  been  its  legal  title  at  the 
time  spoken  of. 

The  Act  of  July  3,  1866,  while  it  allowed  the  Kansas  Pacific 
to  adopt  a  new  route,  provided  that  no  more  United  States  bonds 
should  be  issued  for  it  than  would  have  accrued  to  it  if  it  had 
followed  the  original  route.  The  distance  necessary  to  effect 
the  proposed  junction  with  the  Union  Pacific  was  determined  to 

IH.  V.  and  H.  W.  Poor,  Manual  of  Railroads ,  1877-78. 

2  15  Statutes  at  Large ,  324.  3  15  Statutes  at  Large ,  348. 


42 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


be  393y|  miles,  and  for  so  much  only  of  the  road  were  bonds 
issued.  This  is  important  because  the  mortgage  of  the  govern¬ 
ment  covers  only  those  parts  of  the  system  which  were  built  by 
the  aid  of  the  bond  subsidy.  The  land  grant,  however,  extends 
the  whole  length  of  both  the  Kansas  Pacific  and  the  Denver 
Pacific  lines. 

The  contracts  for  constructing  the  Kansas  Pacific  road  were 
let  to  several  firms  under  whose  various  names  a  ring  of  the 
stockholders,  with  perhaps  slight  variations  of  membership, 
operated.  R.  M.  Shoemaker  and  Co.  had  the  contract  for  build¬ 
ing  the  main  line  to  the  one  hundred  and  fortieth  milestone ; 
Shoemaker,  Miller  and  Co.  for  the  remaining  bond-subsidized 
portion.  On  the  day  of  making  the  first  of  these  contracts 
there  was  a  payment  to  John  D.  Perry  and  Co.  of  $1,136,601.15 
for  the  amount  expended  on  the  road.  No  contract  with  this  com¬ 
pany  can  be  found,  but  as  Perry  and  others  who  were  interested 
in  this  company  were  also  interested  in  both  the  others,  it  may 
perhaps  properly  be  inferred  that  this  company  does  not  differ 
widely  in  make-up  from  the  other  two.  Unfortunately,  the 
books  of  these  companies  are  not  forthcoming,  and  therefore 
details  of  the  construction  period  are  scanty. 

The  bookkeeping  of  the  builders  of  the  Union  Pacific  was 
bad,  but  that  of  the  builders  of  the  Kansas  Pacific  was  much 
worse.  While  in  the  case  of  the  former  it  was  possible  to  give 
not  only  the  cost  of  the  road  to  the  railway  company  but  also 
its  cost  to  the  contractors  who  built  it,  in  the  case  of  the  Kansas 
Pacific  only  the  cost  to  the  Kansas  Pacific  Company  can  be  given. 

Under  the  contract  of  R.  M.  Shoemaker  and  Co.1  the  first  140 
miles  west  of  the  Missouri  River  cost  $10,172,179.21,  or  $72,- 
658.42  per  mile.2  Payment  was  made  in  capital  stock  and  cash 
in  equal  parts.3  For  the  remainder  of  the  bond-subsidized  por¬ 
tion,  i.  e.,  253J-I  miles,  Shoemaker,  Miller  and  Co.  received  $16,- 
232,812.62,  or  $61,225.90  per  mile.  The  contract  called  for  all 
the  United  States  bonds,  i.  e.,  $16,000  per  mile  ;  all  the  first- 

1  Pacific  Railway  Commission,  p.  4864. 

2 Rial.,  p.  4945. 


3  Rid.,  p.  4865. 


HISTORY  OF  THE  BRANCH  ROADS. 


43 


mortgage  bonds  —  an  equal  amount;  $10,000  per  mile  in  income 
bonds  ;  and  $8,000  per  mile  in  capital  stock  ;  and  in  addition  a 
lump  sum  of  $600,000  in  capital  stock  and  $400,000  in  income 
bonds.  In  consideration  of  these  sums  the  construction  com¬ 
pany  was  not  only  bound  to  build  the  road,  but  it  was  also  bound 
to  pay  all  the  debts  of  the  company  unfunded  at  the  time  of  the 
termination  of  the  contract.  These  were  estimated  at  $450,000, 
and  $500,000  was  set  as  the  limit  to  such  payment.1  The 
remaining  portion  of  the  road,  upon  which  there  was  no  bond 
subsidy  but  simply  a  land  subsidy,  is  234  miles  long,  and  is 
known  as  the  Denver  Extension.  Its  cost  was  $7,952,498.83,  or 
$33,985.04  per  mile.  The  total  cost,  then,  of  the  639. 42  miles 
of  road  from  Kansas  City  to  Denver  was  $34,357,490.66. 

The  funds  to  pay  the  construction  accounts  came  from  the 
sale  of  the  following  securities  :  stock,  $10,000,000  ;3  first-mort¬ 
gage  bonds,  $16,000  per  mile  for  393y|-  miles,  amounting  to 
$6,303,000; 4  the  United  States  bonds  which  represented  a 
second  mortgage  on  the  same  part  of  the  road,  also  amounting 
to  $6,303,000 ;  first-mortgage  bonds  on  the  Denver  Extension, 
$6,500,000  ;5  a  mortgage  upon  the  Leavenworth  branch,6  $600,- 
000 ; 7  an  income  mortgage  of  $4,186,000; 8  and  a  land-grant 
mortgage  of  $500, ooo.9  The  total  face  value  of  these  securities 
was  thus  $34,392,000,  or  $34,509.34  more  than  the  cost  of  the 
road  as  given  above. 

The  extravagant  policy  of  the  builders  of  the  Kansas  Pacific 
kept  the  financial  conduct  of  the  enterprise  unsatisfactory  long 
after  the  road  was  completed.  In  1867  the  net  earnings  of  the 
road  were  $190,571.56,  but  the  interest  on  the  bonded  indebted¬ 
ness  which  had  already  been  contracted  was  $467,642.97.  In 

1  Pacific  Railway  Commission ,  pp.  4867-9. 

2  Ibid.,  p.  4440.  4  Ibid.,  p.  119. 

3  Ibid.,  p.  4923.  5  Ibid.,  p.  122. 

6  The  short  line  of  31.6  miles  connecting  Leavenworth  and  Lawrence,  upon 
which  no  subsidy  was  given. — Ibid.,  p.  4902. 

7  Pacific  Railway  Commission,  p.  122.  8  Ibid.,  p.  4902. 

9  Issued  in  1866  and  canceled  later. — Pacific  Railway  Commission,  pp.  4907-4911. 


44 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


1868  the  net  earnings  were  more  than  doubled,  $495,230.61, 
while  the  interest  account  had  fallen  to  $364,371.03.  This  was 
the  only  year  in  the  history  of  the  road  as  an  independent  organ¬ 
ization  when  the  net  earnings  equaled  the  interest  on  the  bonded 
indebtedness.  In  1869  the  net  earnings  were  $437,163.70,  and 
the  interest  $497,246.77.  In  1870  the  interest  account  had 
swelled  to  $1,005,935.51,  and  instead  of  net  earnings  there  was  a 
deficit  of  $790,689.21.  This,  it  will  be  remembered,  was  the  year 
when  the  road  was  built  through  to  its  western  terminus,  Den¬ 
ver.  The  result  of  this  deficit  was  a  land-grant  mortgage  1  for 
$2, 000, 000. 2  During  the  next  year  there  was  some  improvement, 
but  the  net  earnings  of  $264,033.87  were  still  far  short  of  the 
amount  of  the  bonded  interest,  $1,055,358.70.  A  second  mort¬ 
gage  was  therefore  issued  on  the  land  pledged  the  year  before, 
for  the  sum  of  $1,500,000.3  The  following  years  showed  no 
improvement  in  the  affairs  of  the  company,  and  in  1874 4  another 
small  loan  was  raised  on  land  security.  In  October  1876, 5  there 
was  issued  a  funding  mortgage,  covering  the  whole  line,6  for 
$1,500, 000, 7  with  10  per  cent,  interest.  A  schedule  of  securities 
was  placed  in  the  hands  of  the  trustees  of  this  mortgage,  among 
them  a  controlling  interest  in  the  stock  of  the  Denver  Pacific. 
In  1873  there  had  been  a  default  on  its  interest  obligations  by 
the  Kansas  Pacific,  and  in  November,  1876, 8  a  bill  of  foreclosure 
was  filed.  This  put  in  jeopardy  the  control  of  the  Denver 
Pacific,  a  majority  of  its  stock  being  in  the  hands  of  the  trustees 
of  the  funding  mortgage  of  1876.  A  large  majority  of  the 
bonds  upon  which  there  was  default  had  been  sold  abroad,  chiefly 
at  Amsterdam  and  Frankfort.  The  president  of  the  Kansas 
Pacific  therefore  went  to  Europe,  called  a  meeting  of  the  holders 
of  the  various  sorts  of  bonds,  and  showed  them  the  necessity  of 
keeping  the  control  of  the  Denver  Pacific.  The  result  was  a 

1 Pacific  Railway  Commission ,  p.  1 30.  4  Ibid .,  p.  1 30. 

2  Ibid.,  p.  4431.  5  Ibid.,  p.  131. 

3  Ibid.,  p.  130.  6  Ibid.,  p.  443 1. 

7  This  was  to  pay  off  the  floating  debt  which  had  accumulated  previous  to  the 
receivership. — Pacific  Railway  Commission,  p,  4895. 

8  Ibid.,  p.  135. 


HISTORY  OF  THE  BRANCH  ROADS. 


45 


funding  agreement  by  which  there  were  surrendered  matured 
coupons  and  some  which  were  yet  to  mature,  instead  of  which 
there  were  received  what  were  called  Baby  Bonds.  In  case  of 
default  on  these,  the  management  of  the  road  was  to  be  surren¬ 
dered  to  two  receivers,  one  of  whom  should  represent  the  bond¬ 
holders,  the  other  the  junior  securities —  the  railroad  directors’ 
party.1 

A  new  era  in  the  badly  entangled  affairs  of  the  Kansas 
Pacific  was  about  to  begin,  but  before  going  on  to  that  it  may  be 
well  to  turn  aside  to  consider  briefly  the  Denver  Pacific.  This 
was,  as  has  been  intimated,  an  appendage,  and  practically  an 
asset  of  the  Kansas  Pacific,  and  its  affairs  can  be  very  quickly 
disposed  of. 

The  Act  of  March  3,  1869,  referred  to  above,  having  freed 
the  Kansas  Pacific  from  the  necessity  of  building  directly  that 
part  of  the  line  lying  between  Denver  and  Cheyenne,  where  it 
was  proposed  to  connect  the  Kansas  Pacific  line  with  the  Union 
Pacific,  the  construction  of  this  link  was  placed  in  the  hands  of 
an  independent  company.  The  most  prominent  man  connected 
with  this,  the  Denver  Pacific  Company,2  was  John  Evans,  at  one 
time  governor  of  Colorado  and  long  connected  with  railway 
enterprises  in  the  West.  The  details  of  the  construction  period 
cannot  be  given,  as  those  of  the  books  which  are  not  lost  are  in 
a  very  fragmentary  condition.  At  the  completion  of  the  road, 
January  1,  1871, 3  the  capitalization  was  $2,500,000  in  first-mort¬ 
gage  bonds  and  $4,000,000  in  stock.4 

The  Denver  Pacific  was  a  separate  corporation  for  ten  years, 
and  for  three  only  of  the  ten  did  the  net  earnings  exceed  the 
interest  on  the  bonded  indebtedness.  In  1878  there  was  default 
on  payment,  and  in  April  of  that  year  the  road  went  into  the 

1  Pacific  Railway  Commission,  p.  133.  The  scheme  also  provided  for  a  temporary 
issue  of  securities,  to  the  amount  of  $500,000,  the  last  of  which  were  redeemed  and 
canceled  in  1876. — Ibid.,  p.  4895. 

2  Incorporated  in  1867  by  the  territorial  legislature  of  Colorado. — Pacific  Rail¬ 
way  Commission,  p.  4951. 

3H.  V.  and  H.  W.  Poor,  Manual  of  Railroads,  1887,  p.  839. 

4  Pacific  Railway  Commission,  p.  4987. 


46 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


hands  of  receivers,  where  it  remained  until  its  separate  existence 
ceased.1 

To  return  to  the  Kansas  Pacific.  It  was  early  in  1878  that 
Jay  Gould  first  became  interested  in  that  enterprise,  and  he 
straightway  set  about  an  attempt  to  do  something  which  had 
been  talked  about  as  early  as  18752 — harmonizing  the  manage¬ 
ments  of  the  Kansas  Pacific  and  of  the  Union  Pacific.  The 
hostility  between  the  two  roads  had  been  detrimental  to  both. 
In  fact,  the  Kansas  Pacific  assigned  as  the  cause  of  its  bad 
financial  condition  the  refusal  of  the  Union  Pacific  to  prorate  its 
traffic  westward  from  Cheyenne.  The  right  to  prorate  was 
claimed  by  the  Kansas  Pacific  under  the  Act  of  1862, 3  which  pro¬ 
vided  that  the  various  Pacific  roads  should  be  operated  as  one 
system.  The  reply  of  the  Union  Pacific  sufficiently  showed  the 
injustice  of  the  demand,  even  if  it  did  not  meet  the  legal  aspect 
of  the  controversy.  It  was  this  :  That  the  portion  of  the  Union 
Pacific  lying  west  of  Cheyenne  was  far  more  expensive,  both  as 
to  building  and  as  to  maintenance,  than  either  the  Kansas  Pacific 
or  the  line  from  Omaha  to  Cheyenne.  It  would  be  no  more  than 
just,  then,  to  charge  more  for  hauling  freight  through  the  moun¬ 
tains  than  for  hauling  it  over  the  plains.  But  a  wholly  sufficient 
cause  for  the  financial  misfortunes  of  the  Kansas  Pacific  was 
found  in  its  too  great  capitalization. 


1  The  financial  history  of  the  road  is  indicated  by  the  following  figures  : 


Receipts  from 
traffic 

Traffic  expend¬ 
itures 

Net  earnings 

Bonded  Ind.  (No 
Gov’t  Subsidy) 

1870 . 

$304,738.23 

$197,518.42 

$107,219.81 

#138,535*25 

1871 . 

339,145.45 

242,015.98 

97,129.47 

197,623.24 

1872 . 

366,570.42 

169,191.95 

197,378.47 

197,432.52 

202,297.66 

1873 . 

362,378.22 

146,565.29 

215,812.93 

1874 . 

381,149.77 

138,303.69 

242,846.08 

187,335.22 

187s . 

374,229.69 

139,246.00 

234,983.69 

196,680.96 

1876 . 

352,019.27 

246,852.94 

105,116.33 

J88, 353.96 

1877 . 

317,761.05 

186,644.90 

131,116.15 

175,644.65 

1878 . 

187,022.71 

137,829.35 

49,193.36 

1879 . 

137,126.56 

105,308.68 

31,817.88 

$3,122,141.37 

$1,709,477.20 

$1,412,664.17 

$1,483,903.46 

Pacific  Railway  Commission,  pp.  4987,  4991 


2  Pacific  Railway  Commission,  p.  450.  3  Sec.  12.  See  Appendix,  p.  107. 


HISTORY  OF  THE  BRANCH  ROADS. 


47 


The  plan  by  which  Gould  hoped  to  quiet  the  dissensions  of 
the  two  roads  was  embodied  in  the  Kansas  Pacific  Pool  Agree¬ 
ment,  signed  April  24,  1878.  By  this  agreement  twelve  large 
holders  of  Kansas  Pacific  securities  bound  themselves  to  do 
certain  things  ;  viz.,  to  unite  in  interest  the  Kansas  Pacific  and 
the  Union  Pacific  so  that  they  should  be  operated  as  one  road  ; 
to  provide  for  the  reorganization  of  the  Kansas  Pacific  on  a  sound 
basis  ;  to  secure  the  payment  of  its  bonds ;  and  to  apportion  the 
new  stock  which  should  be  issued,  according  to  the  holdings  of 
the  various  subscribers  to  the  agreement.  A  schedule  of  rates 
was  fixed  at  which  securities  might  be  put  into  the  pool,  for 
which  securities  the  managers  of  the  pool  would  issue  certificates 
to  the  owners.1 

If  this  plan  had  been  executed  there  would  have  resulted  a 
company  with  no  lien  on  its  property  except  the  first  mortgage 
over  its  whole  length,  the  government  lien  on  part  of  it,  and 
$4,800,000  of  stock.  But  to  be  successful  it  was  necessary  that 
all  the  securities  outstanding  should  come  into  the  pool.  If  part 
only  were  canceled,  the  rest  would  be  thereby  made  more  valu¬ 
able.2  In  order,  therefore,  to  attract  outside  holders,  the  pool 
prices  were  made  somewhat  higher  than  the  market  rates.3  But 
still  some  holders  of  securities  refused  to  come  in,  and  it  soon 
became  evident  that  the  scheme  would  not  work. 

There  was  then  perfected  the  plan  of  the  consolidated  mort¬ 
gage  which  bears  the  date  of  May,  1879.4  Its  objects  were  to 
get  a  uniform  security  and  to  make  a  saving  in  interest.5  Of 

1  Pacific  Railway  Commission,  p.  162.  At  that  time  the  funded  debt  of  the  Kansas 
Pacific  was  $27,727,350.00,  most  of  it  bearing  7  per  cent,  interest,  some  of  it  6  per  cent,, 
and  some  10  per  cent.  The  annual  interest  charge  was  $1,892,134.50. — Ibid.,  p.  496. 

2  Pacific  Railway  Commission,  p.  455* 

3  Ibid.,  p.  454-  ‘'Ibid.,  p.455. 

5  The  exchange  was  made  as  follows  : 

Denver  Pacific  bonds  at  par .  $1,605,000 

Boulder  Valley  Railroad  bonds,  $438,000,  for. . . .  436,000 

Income  bonds,  stamped . $2,907,450  for  $2,070,431.41 

“  “  unstamped .  137,500  “  118,314.86 


$2,188,746.27 


48 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


these  new  bonds  there  were  issued  $8,457,000,  retiring  various 
obligations  with  higher  rates  of  interest.  The  good  effect  of  the 
Gould  management  was  soon  evident  in  the  income  of  the  com¬ 
pany,  and  the  harmony  existing  between  the  two  roads  which 
had  so  long  been  hostile  was  so  complete  that  it  would  seem  that 
any  further  unification  of  their  interests  was  unnecessary,  until 
it  is  remembered  that  this  harmony  existed  only  so  long  as  one 
man  willed  it  to  exist. 


There  remains  to  be  given  the  history  of  the  least  important 
of  the  Pacific  railways  provided  for  in  the  Act  of  1862  —  the 
Central  Branch  Union  Pacific.  Notwithstanding  its  lack  of 
importance,  this  road  had  perhaps  the  most  picturesque  experi¬ 
ences  of  any  of  the  group. 

Chartered  by  an  act  of  the  territorial  legislature  of  Kansas 
which  was  approved  February  11,  1859,  under  the  title  of  the 
Atchison  and  Pike’s  Peak  Railroad  Company,  it  secured,  on  Jan¬ 
uary  1,  1864,  the  rights  granted  by  the  Act  of  1862  to  the 
Hannibal  and  St.  Joseph.  That  is,  it  was  allowed  to  build  a  road 
westward  from  St.  Joseph  by  way  of  Atchison  to  connect  with 
the  Kansas  Pacific,  and  to  receive  for  not  more  than  one  hundred 
miles  of  its  length  the  same  subsidies  given  to  the  other  Pacific 
railways.  The  name  was  changed  to  the  Central  Branch  Union 
Pacific  on  January  1,  1867. 


Funding  Mortgage  bonds . 

Second  Mortgage,  Land  Grant  bonds 
First  Mortgage,  Land  Grant  bonds . . , 

Leavenworth  Branch  bonds . 

Solomon  Road  bonds . 

National  Land  Company  stock . 

Arkansas  Valley  Railway  bonds . 


Brought  forward,  $2,188,746.27 


$1,167,000 

1,005,000 

8,000 

108,000 

40,000 

1,000 

454,000 


$942,305.60 

827.103.60 
8,000.00 

86,730.00 

40,000.00 

1,000.00 

323.883.60 


$4,417,769.07 


Less  for  fractions .  1,769.07 

- $4,416,000 

In  settlement  with  Jay  Gould,  $2,000,000  at  75. .  1,500,000 

For  discount  on  Gould’s  $2,000,000  at  25 .  500,000 

Total .  $8,457,000 


HISTORY  OF  THE  BRANCH  ROADS. 


49 


March  27,  1865,  the  company  authorized  the  issue  of  $1,600,- 
000  of  first-mortgage  bonds  on  its  property  and  franchise,  with 
the  intention  of  using  the  proceeds  in  construction.  May  9  of 
the  same  year  a  contract  for  building  and  equipping  the  road 
was  given  to  William  Osborn,1  who  divided  it  into  sixty-four  parts 
and  assigned  to  various  parties  all  but  four  of  these  parts.  This 
contract  called  for  the  payment  of  practically  all  the  assets  of 
the  road  —  an  exhaustive  contract.2  At  a  later  date  Osborn’s 
share  was  bought  up  and,  the  others  consenting,  the  contract 
was  canceled. 

From  March  1866  on,  the  sale  of  bonds  proceeded,  and, 
together  with  the  sale  of  stock  options,  furnished  the  bulk  of 
the  funds  for  building  the  road.  The  subsidy  bonds  for  the 
first  completed  section  of  twenty  miles  were  issued  August  2, 
1866.  Those  for  the  fifth  and  last  section  were  issued  January 
24,  1 868. 3  Although  this  last  issue  of  bonds  indicates  that  a 
United  States  commissioner  had,  in  January,  1868,  examined 
the  last  twenty  miles  of  road  and  sworn  that  it  fulfilled  the 
requirements  of  the  law,  it  was  not  until  September  8,  1868, 
that  the  contractor  wrote  announcing  the  completion  of  the 


road.4 

The  books  of  the  contractor  show  that  the  cost  of  the  road 
was  as  follows  : 

Construction .  $2,306,430.42 

Equipment .  243,924.52 

$2,550,344,945 

Subsequent  bills  for  construction  and  equipment  181,002.29 


$2,731,347.23 

To  meet  this  charge  the  funds  were  obtained  as  follows]: 


For  $1,600,000  United  States  bonds .  $ 1 ,5 77,6 5 1.55 

For  stock  options .  392,225.53 

For  $1,600,000  first-mortgage  bonds .  567,612.14 


$2,537,489.22 


1  Pacific  Railway  Commission ,  p.  5303. 

2  Ibid. ,  p.  4091.  4  Ibid.,  p.  5304. 


3 Ibid.,  p.  5303. 

5  Note  mistake  in  addition. 


50 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Of  this  latter  sum  $491,612.14  was  received  in  cash,  and 
$76,000  in  services  and  credits  on  accounts.  There  were  842 
bonds  disposed  of  without  any  clear  account  being  rendered. 
They  are  entered  under  the  headings  “compensation,”  “dona¬ 
tion,”  “existing  liabilities,”  etc.1 

When  the  Kansas  Pacific  turned  westward  from  Fort  Riley 
to  go  to  Denver,  instead  of  to  its  proposed  junction  with  the 
Union  Pacific  at  the  one-hundredth  meridian,  the  Central 
Branch  found  its  plans  badly  upset.  It  thus  became  a  spur  run¬ 
ning  out  into  the  midst  of  the  prairie,  with  no  western  connec¬ 
tions.  But  sound  lawyers  said  that  the  Act  of  July  3,  1866, 
could  not  be  construed  so  as  to  deprive  the  Central  Branch  of 
its  right,  under  the  Act  of  1864,  to  continue  its  road  up  the 
old  route  of  the  Kansas  Pacific  to  a  junction  with  the  Union 
Pacific.2  Others  would  only  go  so  far  as  to  say  that  this  action 
of  the  Kansas  Pacific  which  Congress  had  sanctioned  gave  the 
Central  Branch  a  strong  equitable  claim  on  Congress  for  reme¬ 
dial  legislation.  Senator  Fessenden,  of  Maine,  who  had  up  to 
this  time  been  an  opponent  of  the  Pacific  railway  subsidies, 
recognized  the  force  of  this  reasoning  so  that  he  approved  the 
action  of  the  company  in  pressing  its  claim.  A  bill  was  intro¬ 
duced  to  declare  that  the  rights  of  the  Central  Branch  were  in 
no  way  affected  by  the  act  allowing  the  Kansas  Pacific  to  fol¬ 
low  the  Smoky  Hill  fork  of  the  Kaw.  This  was  opposed  by 
the  Kansas  Pacific,  and  narrowly  defeated  in  the  Senate.3 
But  the  claim  was  pressed  before  the  executive  branch  of  the 
government,  and  the  company  was  finally  allowed  to  file  a  map 
for  the  extension  of  the  road  to  a  junction  with  the  Union  Pacific. 
President  Grant  signed  this  map,  and  the  matter  seemed  to  be 
settled.  Later,  however,  certain  men  whose  inspiration  seems 
to  have  been  drawn  from  Wall  street  convinced  the  president 
that  his  previous  action  in  signing  the  map  had  been  urged 
upon  him  by  those  who  wished  to  manipulate  the  stock  market, 
and,  to  avoid  being  used  as  the  tool  of  speculators,  he,  in  Janu- 

1  Pacific  Kailway  Commission ,  p.  5331. 

2  Ibid.,  pp.  4144-6. 


3  Ibid.,  p.  4093. 


HISTORY  OF  THE  BRANCH  ROADS. 


51 


ary  1873,  sent  to  the  Department  of  the  Interior  for  the  map 
and  tore  off  his  signature.1  It  was  attempted  for  several  years 
to  get  redress  for  this  ill-advised  action,  but  without  success. 

The  Central  Branch  having  lost  the  advantage  which  it  was 
expected  would  accrue  to  it  through  connection  with  the  Pacific 
railway  system,  the  policy  was  developed  of  encouraging  the 
building  of  numerous  short  lines  into  the  country  lying  west  of 
the  subsidized  portion,  for  the  sake  of  developing  local  traffic.2 

In  1877  Oliver  Ames  began  to  take  an  active  interest  in  the 
affairs  of  the  Central  Branch.3  ITe  had  inherited  from  his  father, 
Oakes  Ames,  666  shares  of  stock  and  27  bonds.  In  1878  and 
1879  he  increased  his  holdings  by  purchases  of  stock  at  prices 
varying  from  50  or  less  up  to  160. 

In  the  fall  of  1879  negotiations  were  begun  for  the  sale  of 
the  property  to  Jay  Gould,  who  then  controlled  the  Kansas 
Pacific.  Ames,  having  a  strong  financial  circle  back  of  him,  was 
pushing  construction  forward  with  the  avowed  intention  of  going 
to  Denver.  Gould,  who  claimed  this  territory  for  the  Kansas 
Pacific,  was  building  a  parallel  line  so  near  to  the  Central  Branch 
that  they  at  times  disputed  the  right  of  way.  At  the  same  time 
Ames  was  negotiating  for  a  sale  of  his  line  to  the  Chicago,  Bur¬ 
lington  and  Quincy,  was  communicating  with  Garrison  of  the 
Missouri  Pacific,  and  had  some  talk  with  Palmer  of  the  Chicago, 
Rock  Island  and  Pacific.  He  was  offering  his  stock  at  $300  per 
share.  Finally  he  offered  Gould  five-eighths  of  the  amount  out¬ 
standing,  $1,000,000,  at  $250,  and  the  offer  was  accepted.4 

1  Pacific  Railway  Commission ,  p.  4096. 

2  The  first  of  these  roads  was  the  Waterville  and  Washington,  20.69  nailes  in 
length,  leased  to  the  Central  Branch  December  15,  1876.  The  Republican  Valley 
Railroad  followed  just  a  year  later.  The  Atchison,  Solomon  Valley  and  Denver 
Railway  was  leased  from  August  20,  1878,  and  the  Atchison,  Republican  Valley  and 
Pacific  on  January  1,  1879.  These  roads,  with  the  Atchison  and  Denver,  were  con¬ 
solidated  under  the  name  of  the  Atchison,  Colorado  and  Pacific  Railroad,  and  Decem¬ 
ber  27,  1879,  were  leased  to  the  Central  Branch  for  25  years,  the  Central  Branch 
agreeing  to  pay  an  annual  rental  of  $1000  per  mile  and  keep  the  roads  in  repair.  On 
the  same  day  the  Atchison,  Jewell  County  and  Western  also  was  leased  on  the  same 
terms. 

3 Pacific  Railway  Commission ,  p.  802.  4 Ibid.,  p.  807. 


52 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Straightway,  November  7,  1879,  the  bargain  was  put  on  paper, 
Gould  agreeing  to  pay  in  equal  amounts  of  Union  Pacific  collat¬ 
eral  trust  bonds  and  of  Kansas  Pacific  consolidated  mortgage 
bonds.  On  this  day  Ames  owned  but  2890  shares,  and  he  had 
agreed  to  deliver  6250  shares.  November  11,  1879,  Gould 
agreed  to  take  in  addition  1000  shares  at  $ 200 ,  and  1000  at  Si 75, 
payment  to  be  made  in  Kansas  Pacific  consols.1  On  the  19th  of 
the  same  month  he  gave  Ames  a  thirty  days’  option  to  sell  him 
the  remaining  1620  shares  or  any  part  thereof  at  $150. 2  Between 
November  11  and  December  30,  1879,  Ames  turned  over  6250 
at  $250,  1000  shares  at  $200,  and  366  at  $175,  receiving  therefor 
Si, 826, 500.  Payment  was  made  in  Union  Pacific  6’s  to  the 
amount  of  S9 13,500,  and  in  Kansas  Pacific  6’s  to  the  amount  of 
S9 1 3, 000. 3  Ames  also  delivered  to  Gould  a  majority  of  the 
stock  of  the  Atchison,  Colorado  and  Pacific,  and  of  the  Atchison, 
Jewell  County  and  Western  —  8443  shares  in  all.4  On  January 
24,  1880,  Gould  turned  over  this  property  to  the  Kansas  Pacific, 
receiving  therefor  just  what  he  gave  and  in  the  same  kind  of 
securities.5 

Thus  this  little  road,  100  miles  in  length,  during  the  few  years 
that  it  maintained  a  separate  existence,  went  through  various 
phases  of  interesting  railway  experience.  It  was  built  for  profit, 
and  run  at  a  loss.  It  guaranteed  the  bonds  of  other  roads,  and 
was  in  default  on  the  interest  of  its  own.  It  leased  a  system  of 
feeders  with  an  aggregate  mileage  of  more  than  twice  its  ow  n 
length.  While  continuing  to  pile  up  deficits,  and  never  having 
paid  a  dividend,  its  stock  sold  at  250  to  the  shrewdest  railway 
manipulator  of  the  age.  Then  it  was  dropped  into  the  treasury 
of  the  Kansas  Pacific,  another  road  with  a  history  made  up  of 
financial  failures,  remained  there  a  few  hours,  and  at  last  lost  its 
identity  by  absorption  into  the  reorganized  Union  Pacific  Rail¬ 
way  system. 

Having  reviewed  the  history  of  the  building  of  each  of  the  com- 

1  Pacific  Raihvay  Commission,  p.  808. 

2  Ibid.,  p.  526.  4  Ibid.,  p.  809. 

3  Ibid.,  p.  524.  s  Ibid.,  p.  527. 


HISTORY  OF  THE  BRANCH  ROADS. 


53 


ponent  parts  of  the  Pacific  railway  system,  it  is  now  possible  to 
look  at  the  group  as  a  whole.  The  plan  laid  down  in  the  charter 
acts  was  shown  by  the  map  on  page  14.  It  is  interesting  to  com¬ 
pare  that  plan  with  the  system  as  built,  calling  to  mind  the  forces 
which  effected  the  changes.  The  completed  system  is  shown 
in  the  accompanying  map  : 

PACIFIC  R.  R.  SYSTEM,  AIDED  PORTION  AS  BUILT. 


To  him  who  studies  the  construction  of  the  first  Pacific 
railway  in  the  light  of  present  methods  of  railway  building,  the 
men  who  put  through  this  great  enterprise  seem  immeasurably 
extravagant  if  not  corrupt.  Those  who  suffered  from  their  manip¬ 
ulations  of  the  leading  railway  properties  of  the  West  are 
pretty  sure  to  call  them  corrupt.  But  to  him  who  looks  at  the 
railway  history  of  the  country  as  a  whole,  the  building  of  the  first 
railway  to  the  Pacific  appears  as  a  mere  episode,  to  be  measured 
by  quite  different  standards.  Such  an  one  will,  of  course,  regret 
that  extravagant  and  questionable  methods  were  used,  but  he 
will  not  visit  upon  the  managers  of  this  work  unqualified  con¬ 
demnation,  as  so  many  have  done. 

The  construction  of  the  earliest  American  railways  was  car¬ 
ried  on  with  funds  obtained  by  the  sale  of  stock.  Thus  the  con¬ 
trol  and  the  ownership  of  the  roads  were  in  the  same  hands,  as 
they  ought  to  be.  Later  it  became  evident  that  unfinished  roads 
could  be  mortgaged  to  raise  part  of  the  funds  for  construction, 
and  this  policy  was  used  with  increasing  frequency.  At  last  the 
bonds  were  made  to  furnish  almost  the  whole  of  the  construction 
fund,  and  the  stock  was  given  to  the  bondholders  as  a  mere 


54 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


bonus.  Property  thus  obtained  was  parted  with  readily,  and  it 
was  possible  to  buy  cheaply  the  control  of  a  road  and  manage  it 
as  a  speculation,  to  the  detriment  of  the  bondholders.  This 
practice  of  separating  ownership  and  management  was  highly 
unfortunate.  A  still  worse  development  of  railway  policy  came 
about  the  same  time — the  use  of  the  construction  company. 
This  was  in  essence  a  limited  liability  corporation,  formed  by 
stockholders  or  others  to  secure  the  profits  of  building  a  road 
for  the  mortgage  bondholders.  The  contracts  for  construction 
were  made  exhaustive,  i.  e.,  all  the  possible  resources  of  the  road 
were  given  to  the  builders  for  their  work  ;  and  the  men  who 
furnished  the  money  found  their  property  hopelessly  loaded 
down  with  a  debt  upon  which,  in  many  cases,  the  interest  could 
not  be  paid.  This  necessitated  a  reorganization,  or  successive 
reorganizations,  in  which  investors  suffered  and  speculators 
thrived. 

At  this  stage  in  the  development  of  American  railway  policy 
the  government  found  itself  in  need  of  a  railway  to  the  Pacific. 
Plow  the  road  would  be  built,  if  built  then,  was  patent  to  all. 
The  war  was  in  progress,  so  the  offer  which  was  made  was  a  war¬ 
times  price.  The  first  offer,  of  1862,  was  not  taken  up  ;  so  a 
second  was  made  two  years  later,  doubling  the  first,  and  was 
accepted.  It  was  a  fair  bargain,  and  the  government  got  just 
what  it  bargained  for.  The  proper  thing  to  regret  is  not  that 
this  particular  enterprise  was  carried  through  in  an  undesirable 
way,  but  rather  it  should  be  regretted  that  the  American  people 
should  ever  have  adopted  such  industrial  methods. 


CHAPTER  V. 


INTERNAL  HISTORY  OF  THE  UNION  PACIFIC,  1869-1895. 

It  has  been  seen  that  the  stock  of  the  Union  Pacific  was 
accepted  by  the  men  who  built  the  road  as  the  source  of  a  very 
uncertain  profit  on  the  investment.  Naturally  it  was  from  the 
beginning  a  speculative  stock,  and  even  as  early  as  1 869  1  the  noto¬ 
rious  James  Fisk  made  an  unsuccessful  attempt  to  control  it.  In 
1872  Horace  F.  Clark  and  his  friends  bought  a  controlling  interest 
at  30  or  thereabouts,  the  plan  being  to  throw  the  Union  Pacific 
traffic  over  the  Vanderbilt  roads  —  Clark  being  Commodore  Van¬ 
derbilt’s  son-in-law,  and  a  director  of  the  New  York  Central. 

During  the  next  year,  at  Clark’s  death,  this  stock  was  put  on 
the  market,  and  it  chanced  that  an  order  of  Jay  Gould’s  to  his 
brokers  to  buy  what  was  offered  at  35  or  less,  was  given  about 
the  same  time.2  Gould  thus  came  into  possession  of  Clark’s 
stock.  Soon  after  this  the  price  was  depressed  to  14,  and  Gould, 
in  alarm,  began  to  investigate.  He  found  that  there  was  an 
immense  floating  debt,  carried  at  high  rates  of  interest ;  $10,000,- 
000  of  income  bonds  soon  falling  due  ;  and  various  other  unsatis¬ 
factory  features  of  the  situation.  By  giving  to  the  task  almost 
his  whole  time  and  instituting  much-needed  reforms,  Gould  suc¬ 
ceeded,  within  three  years,  in  placing  the  road  on  a  dividend¬ 
paying  basis,3  and  during  a  period  of  less  than  five  years  there¬ 
after  the  dividends  paid  amounted  to  $1 1,942, 125. 4 

This  dividend-paying  period  was  marred  by  the  hostilities 
with  the  Kansas  Pacific  referred  to  on  page  46,  which  led  to  the 

1  Credit  Mobilier  Investigation,  p.  260. 

2  Pacific  Railway  Commission,  p.  446. 

3 Ibid.,  p.  447. 

‘■Ibid.,  p.  4810 :  In  1875  3^  per  cent.  In  1878  7^  percent. 

1876  8  per  cent.  1879  6  per  cent. 

1877  8  percent.  Jan.  1880  percent. 

*  55 


56  HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 

talk  of  consolidating  the  two  properties.  This  talk  was  signifi¬ 
cant  only  as  foreshadowing  the  unification  of  interests  which 
came  a  few  years  later. 

Between  1873  and  1878  Gould  increased  his  holding  in  Union 
Pacific  stock  from  about  100,000  shares  to  double  that  amount, 
or  five-ninths  of  the  total  issue.1  During  the  next  two  years, 
however,  he  sold  largely,  thus  surrendering  his  absolute  control 
of  the  road.  Attention  has  already  been  called  to  the  fact  that, 
in  1878,  Gould  took  hold  of  the  Kansas  Pacific  property,2  and 
quieted  the  quarrels  with  the  Union  Pacific  over  the  prorating 
of  traffic.  Gould’s  connection  with  the  Central  Branch  has  also 
been  related.3  The  significance  of  all  these  things  will  appear 
upon  a  study  of  the  situation  at  the  end  of  1879. 

Gould’s  sale  of  Union  Pacific  stock  and  his  buying  of  Kansas 
Pacific  indicates  his  estimate  of  the  relative  value  of  the  two 
roads.  The  fact  that  the  Union  Pacific  was  a  link  in  the  only 
rail  route  across  the  continent  had  assured  to  it  at  once  a  place 
of  importance  in  the  commercial  world  and  an  immediate  income. 
The  importance  of  the  Kansas  Pacific  came  later,  and  Gould 
seems  early  to  have  recognized  that  importance. 

B}^  the  summer  of  1879  the  physical  condition  of  the  Kansas 
Pacific  had,  under  Gould’s  management,  been  greatly  improved. 
The  filling  in  of  its  territory  with  settlers  had  increased  busi¬ 
ness  and  permitted  the  spending  of  money  for  the  betterment 
of  the  property.  During  a  recent  trip  abroad  Gould  had 
observed  with  admiration  the  compact,  non-competing  railway 
systems  of  England,  and  perhaps  he  was  influenced  by  this  to 
desire  the  consolidation  of  the  Union  Pacific  and  the  Kansas 
Pacific.4  His  chief  interest  was  in  the  southern  road,  but  the 
men  of  the  Union  Pacific  agreed  with  him  perfectly  in  this  wish. 
Consolidation  was  therefore  inevitable,  and  it  would  have  come 
sooner  than  it  did  but  for  the  friction  which  arose  over  the  rela¬ 
tive  values  of  the  properties.  The  Union  Pacific  people  combat¬ 
ted  strongly  Gould’s  opinion  that  the  Kansas  Pacific  stock  was 

1  Pacific  Railway  Commission,  p.  451.  3  Page  51,  above. 

2  Page  46,  above.  *  Pacific  Railway  Commission,  p.  178. 


INTERNAL  HISTORY  OF  THE  UNION  PACIFIC. 


57 


worth  more  per  share  than  the  stock  of  the  Union  Pacific.1  Gould 
argued  thus  for  his  position  :  The  Kansas  Pacific  is  much  less 
heavily  capitalized  than  the  Union  Pacific,  and  so  has  lighter  fixed 
charges  ;  it  runs  fifty  miles  further  east,  and  so  has  a  longer  stretch 
of  agricultural  country  to  draw  from  ;  it  lies  2000  feet  lower  than 
the  Union  Pacific,  and  so  is  in  less  danger  from  snows ;  its  land- 
grant  is  more  valuable ;  its  terminals  at  both  Kansas  City  and 
Denver  are  very  valuable.2 

On  the  other  hand,  the  Union  Pacific  people  pointed  out  the 
much  greater  net  earnings  of  their  road  and  the  large  dividends 
which  had  been  paid  by  it.  Neither  the  Kansas  Pacific  nor  the 
Denver  Pacific  had  ever  paid  a  dividend.3 

The  reply  to  this  is  found  in  the  comparatively  small  capital¬ 
ization  of  the  southern  roads  and  in  the  fact  that  under  Gould’s 
management  they  had  been  raised  greatly  in  physical  condition. 
The  filling  in  of  the  Kansas  Pacific  territory  led  Gould  to  pre¬ 
dict  that  that  road  would  soon  outstrip  the  Union  Pacific  in  earn¬ 
ing  capacity.4  As  an  argument  of  another  sort  he  showed  how, 


T  Pacific  Railway  Commission,  p.  660. 

2  Ibid.,  p.  897.  3  Ibid.,  p.  888. 

*  The  merits  of  the  case  may  be  judged  from  the  following  figures  : 


Mileage 

Capital 

Stock 

Funded  Debt 

Capitalization 

Capitaliza¬ 
tion  per 
Mile 

Union  Pacific . 

Kansas  Pacific.  . . . 
Denver  Pacific .... 

IO39 

673 

106 

$36,762,3005 

10,000,000 

4,000,000 

#78,508,350.65 

30,567,282.78 

581,000.00 

$115,270,650.65 

40,567,282.78 

4,581,000.00 

$110,870 

60,278 

43,216 

1823 

$50,762,300 

$109,656,633.43 

$160,418,933.43 

Net  Earnings 

Net  Earnings  per  Year 

Net  Earnings 
per  Mile 
per  Year  9 

Union  Pacific.. 
Kansas  Pacific. . 
Denver  Pacific. 

(1867-80)  6  $64,020,833.56  8 
(1867-80)  7  8,220,217.60 

(1870-79)  7  1,412,664.17 

(10  years)  $5,835,713-37 
(  8  years)  1,077,988.45 
(10  years)  141,266.42 

$5,616.66 

1,601.77 

1,332.70 

5  Pacific  Railway  Commission,  pp.  4832-3. 

6  Ibid.,  p.  4802.  7  Ibid.,  p.  4806. 

8  From  Boston  books.  Those  at  Omaha  give  slightly  different  results. 
9 Pacific  Railway  Commission,  p.  4988. 


58 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


by  an  extension  of  its  branches,  the  Kansas  Pacific  could  seriously 
cut  into  the  Union  Pacific  traffic. 

Although  all  that  Gould  said  was  acknowledged  to  be  reason¬ 
able  enough,  the  Union  Pacific  party  still  held  back,  and  this 
irritated  Gould.  Finally  he  began  a  series  of  maneuvers  which 
quickly  brought  them  to  terms.  How  he  bought  the  Central 
Branch  has  already  been  told.3  This  road,  lying  between  the 
Union  Pacific  and  the  Kansas  Pacific,  was  bought  for  the  joint 
protection  of  the  two  properties,  with  an  understanding  between 
Gould  and  the  other  directors  that  if  consolidation  was  effected 
this  should  be  taken  in.4  Commodore  Garrison  was  at  that  time 
extending  the  Missouri  Pacific,  which  then  consisted  of  a 
scant  300  miles  of  road,5  into  Kansas  Pacific  territory.  Gould 
threatened  to  build  the  Kansas  Pacific  as  far  east  as  Garrison 
built  the  Missouri  Pacific  west.  Stormy  interviews  ensued,  and 
finally  Garrison  suggested  that  the  cheapest  way  to  stop  the  fight 
was  for  Gould  to  buy  the  Missouri  Pacific.6  This  proposal  met 


Interest  per  Mile 
per  Year 

Dividends 

1869  (*.  e.  1875) 
to  1880 

Union  Pacific . 

Kansas  Pacific . 

Denver  Pacific . 

#3,185.39 

2,294.71 

1,749.89 

$11,942,125  1 

Comparison  of  Accounts  for  1879. 2 

Gross  Earnings . 

Operating  Expenses  and  Taxes.. 

Income. 

Union  Pacific 

.  .  $12,983,155.74 

5,475,503-44 

Kansas  Pacific 
$4,839,188.42 
'2,881,689.32 

Surplus  Earnings . 

Miscellaneous  Income . 

.  .  $  7,507,652.30 

436,889.84 

#i,957,499-io 

Total  Income . 

..  $  7,944,542.14 

#U957,499.io 

Other  than  Dividends . 

Dividends . 

Expenditures. 

.  $5,386,891.81 

$1,654,464.69 

Total . 

••  $7,59I,59I.8l 

$1,654,464.69 

1  Pacific  Railway  Commission, 
2 Ibid.,  p.  897. 

3  Page  51,  above. 

p.  888. 

4  Pacific  Railway  Commission,  p.  66 1. 
3  Ibid.,  p.  506. 

6  Ibid.,  p.  509. 

INTERNAL  HISTORY  OF  THE  UNION  PACIFIC. 


59 


Gould’s  favor,  and  November  13,  1 8 79,1  the  bargain  was  struck, 
$3,000,000  being  paid  for  4000  shares  of  stock  —  $750  per 
share.2 

Having  bought  the  Central  Branch  to  protect  both  the 
Union  Pacific  and  the  Kansas  Pacific,  and  the  Missouri  Pacific  to 
protect  the  latter,  Gould  announced  his  next  move.  Since  the 
Union  Pacific  lay  north  of  the  richest  mineral  belt  and  the 
Southern  Pacific  south  of  it,  there  was  a  place  for  a  road  between 
them.  Gould  proposed  to  furnish  this  road.  The  Missouri 
Pacific  and  the  Kansas  Pacific  being  operated  harmoniously,  it 
was  only  necessary  to  build  westward  from  Denver  through  the 
Loveland  Pass  to  Ogden,  where  the  Central  Pacific  could  be 
joined,  in  order  both  to  tap  the  mineral  belt  and  also  to  secure 
the  shortest  route  across  the  continent.3  This  would  have  ruined 
the  Union  Pacific,4  and  the  Union  Pacific  people  knew  it.  There 
was  panic  in  their  camp.  Frequent  interviews  with  Gould  were 
held,  and  it  was  urged  upon  him  that  he  had  already  committed 
himself  to  the  previously  planned  consolidation.  Although 
Gould  had  the  matter  entirely  in  his  own  hands,5  he  acknowl¬ 
edged  the  force  of  this  statement,  and  at  last  consented  to  con¬ 
solidation  on  the  terms  which  he  had  originally  offered.  The 
first  of  the  papers  necessary  to  the  carrying  out  of  this  bargain 
was  drawn  up  January  14,  1880;  the  final  articles  of  consolida¬ 
tion  were  signed  January  24,  1880. 6 

This  consolidation  merged  into  one  new  company  what  had 
previously  been  three  separate  companies  —  the  Union  Pacific, 
the  Kansas  Pacific,  and  the  Denver  Pacific.  The  name  adopted 
was  the  Union  Pacific  Railway  Company,  to  distinguish  it  from 
the  old  Union  Pacific  Railroad  Company.  The  amount  of  the 
capital  stock  was  fixed  at  $50, 762, 300, 7  the  sum  of  the  capital 
stocks  of  the  three  constituent  companies.  This  new  stock  was 
issued  dollar  for  dollar  of  the  old. 

1 Pacific  Railway  Commission,  p.  506.  4  Ibid.,  p.  509. 

2 Ibid.,  p.  529.  5  Ibid.,  p.  558. 

3  Ibid.,  p.  505.  6  For  text  see  Ibid.,  p.  668. 

7  See  note  4  on  p.  57  above.  In  1881  this  was  raised  to  $60,868,500.  Pacific 
Railway  Commission,  p.  885. 


6o 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


The  new  Union  Pacific  stock  immediately  became  worth  more 
than  the  old  had  been.  As  the  Denver  Pacific  stock  had  been 
practically  worthless  except  as  controlling  the  Kansas  Pacific 
traffic,  and  as  the  Kansas  Pacific  stock  had  stood  considerably 
lower  in  the  market  than  even  the  old  Union  Pacific  stock,  this 
move  put  money  into  the  pockets  of  the  holders  of  all  three  of 
these  stocks.  Among  this  number  were  several  of  the  directors 
of  the  Union  Pacific,  but  they  all,  except  Gould,  held  much 
more  of  the  stock  of  the  Union  Pacific  —  which  rose  least  —  than 
of  the  other  kinds.  It  might  be  supposed  that  Gould  was  the 
one  most  anxious  for  consolidation.  The  contrary,  however,  is 
the  truth.  It  was  the  Union  Pacific  people  who  did  all  the  urg¬ 
ing  for  consolidation,  and  Gould  who  simply  acquiesced.1 

The  reorganization  of  1880  and  the  consequent  economies 
were  highly  beneficial  to  all  the  properties  concerned.  The 
great  genuine  prosperity  of  the  old  Union  Pacific  Company  was 
bequeathed  to  the  new  company  in  the  shape  of  an  apparent  but 
not  real  continuing  prosperity.  During  the  years  immediately 
following  the  consolidation,  railway  construction  was  active  in 
the  West.  Gould  foresaw  the  inevitable  result  of  increased  com¬ 
petition  on  the  Union  Pacific,  and,  while  allowing  a  large  floating 
debt  to  accumulate  and  while  continuing  the  payment  of  divi¬ 
dends,  he  quietly  unloaded  his  stock  in  small  parcels  all  over  the 
country.  The  effect  of  his  dividend-paying  policy  was  evident — he 
had  succeeded  in  convincing  the  public  that  the  Union  Pacific 
had  become  an  investment  stock  instead  of  a  speculative  one.2 

1  Union  Pacific  directors  held  stock  as  follows: 


Kansas  Pacific 

Union  Pacific 

Jay  Gould . 

$4,000,000 

$2,700,000 

F.  Gordon  Dexter. . . 

125,700 

637,600 

E.  H.  Baker . 

27,400 

1,000,000 

Russell  Sage . 

443,000 

1,470,000 

Elisha  Atkins . 

45,600 

293,700 

Frederick  L.  Ames.. . 

179,600 

3,861,200 

Sidney  Dillon . 

305,900 

Pacific  Railway  Commission,  pp.  463,  700,  745,  393,  754,  687,  201,  702,  745,  393, 
754,  687. 

2  In  1884  only  one-fifth  of  the  stock  was  held  in  Wall  street. — Report  of  Govern¬ 
ment  Directors. 


INTERNAL  HISTORY  OF  THE  UNION  PACIFIC. 


6l 

About  the  year  1883  there  came  very  serious  changes  in  the 
railway  situation  in  the  trans-Missouri  territory.  The  Atchison, 
Topeka  and  Santa  Fe  had  the  year  before  connected  with  the 
Southern  Pacific,  and  its  competition  began  to  be  felt.1  The 
Northern  Pacific  was  completed  and  claimed  its  share  of  the 
Montana  and  northern  Coast  trade.  The  Denver  and  Rio 
Grande  reached  Ogden,  and  divided  the  Salt  Lake  traffic.  The 
Southern  Pacific  affected  the  business  with  San  Francisco  and 
the  southern  part  of  California.  The  Horn  silver  mines  ceased 
to  produce,2  and  their  profitable  freight  was  lost.  Altogether, 
these  things,  within  a  year,  made  a  difference  to  the  Union  Pacific 
Railway  Company  of  several  millions  of  dollars.3 

When  Gould  succeeded  in  stepping  from  under  his  load  of 
Union  Pacific  securities  and  the  ownership  of  the  road  changed 
hands,  there  came  a  change  in  the  management  of  the  road.  In 
1884  Charles  Francis  Adams  became  president.  He  found  him¬ 
self  in  command  of  a  road  whose  builders  had  over-capitalized 
it  and  whose  subsequent  owners  had  trickishly  weighted  it  down 
with  further  debts  while  its  earning  capacities  were  being 
impaired.  Adams  stopped  the  payment  of  dividends  and  set 
to  work  on  the  hopeless  task  of  staying  the  road  on  its  descent 
toward  bankruptcy.4 

1  Pacific  Railway  Commission ,  p.  3346. 

2  Ibid.,  p.  68. 

3  Ibid.,  p.  85. 

In  1886  the  transcontinental  traffic  was  divided  with  six  competitors,  and  consti¬ 
tuted  but  7^  per  cent,  of  the  whole  traffic  of  the  Union  Pacific. — Report  of  Gov¬ 
ernment  Directors. 

4  Connected  with  this  taking  of  the  presidency  of  the  Union  Pacific  by  Adams  is 
a  letter  of  his,  the  equal  of  which  could  not  be  found  if  all  the  annals  of  the  railway 
industry  were  searched.  It  was  called  out  by  a  letter  signed  “  Investigator”  in  the 
Boston  Advertiser  of  December  18,  1882,  in  which  the  question  was  raised  what  it  is 
that  determines  the  market  value  of  railway  stocks.  Adams’s  letter  is  given  in  full 
below : 

To  the  Editors  of  the  Boston  Advertiser :  —  I  notice  what  Investigator  says  in 
his  communication  of  yesterday  in  your  financial  columns  on  the  matter  of  the  present 
price  of  Union  Pacific  stock.  He  speaks  of  “Wall  Street  values,”  and  the  “intrinsic 
worth  ”  of  the  stock  as  “  an  investment.”  I  should  like  to  say  something  on  this 
point,  as  it  seems  to  me  of  more  importance  just  now  than  at  first  appears. 


62 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


On  one  important  feature  of  railway  policy  Gould  and 
Adams  were  entirely  agreed.  Both  recognized  the  absolute 
necessity  of  building  up  a  system  of  branch  roads  which  should 
feed  the  main  trunk  with  traffic.  The  roads  which  compete 
with  the  Union  Pacific  are  of  course  under  the  same  necessities, 
and  whenever  one  of  these  roads  has  to  build  a  branch,  either 
to  secure  valuable  traffic  or  to  keep  a  competitor  from  intruding 
into  territory  naturally  its  own,  the  branch  is  built  and  the  cap¬ 
italization  of  the  parent  road  is  increased  to  pay  for  it.  This  mode 
of  procedure  is  impossible  with  the  Union  Pacific.  Its  charter 
is  a  particularly  narrow  one,  and  provides  for  the  consolidation 
of  only  those  roads  which  were  mentioned  in  the  charter.  The 
Union  Pacific  must  therefore  adopt  a  more  roundabout  method 
of  procedure.  The  branches  of  that  road  are  controlled  by  the 
possession  of  a  majority  of  the  stock,  which  allows  the  Union 
Pacific  people  to  vote  a  lease  of  the  branch  to  the  parent  road, 
the  terms  usually  being  a  guarantee  of  the  interest  on  the  bonded 
indebtedness. 

Some  years  ago,  in  1878,  I  think,  I  was  a  government  director  of  the  Union 
Pacific.  As  such  I  had  to  make  a  thorough  investigation  of  the  property  and  report 
upon  it.  I  was  then  so  much  impressed  with  the  value  of  the  road  as  an  investment, 
that  when  I  shortly  after  resigned,  as  agent  of  certain  persons  and  adviser  of  others, 
I  was  instrumental  in  some  heavy  purchases  of  the  stock.  They  were  made  at  figures 
not  materially  different  from  those  now  ruling,  and  as  an  investment  have  resulted 
well.  Some  months  ago  when  the  present  depression  began  to  affect  the  price  of  the 
stock,  I  thought  it  would  be  well  to  again  look  pretty  carefully  into  its  value.  Accord¬ 
ingly  I  did  so,  passing  two  whole  weeks  in  October,  going  carefully  over  the  whole  line 
in  company  with  its  officers,  studying  its  system  of  feeders,  informing  myself  as  to  its 
policy,  and  generally  having  every  source  of  information  freely  opened  to  me.  There 
could  be  no  question  as  to  the  greatly  improved  condition  of  the  property  between 
my  examination  in  1878  and  my  present  examination.  There  could  be  equally  little 
question  as  to  the  development  of  the  country  or  of  the  business  of  the  road. 

Returning  East  thoroughly  satisfied  on  these  points,  I  went  to  New  York.  I  found 
a  veritable  panic  prevailing  in  respect  to  the  stock.  It  had  fallen  fifteen  points  and 
was  still  going  down.  Everyone  I  saw  was  a  “bear”  upon  it,  and  I  was  assured  it 
was  going  to  75.  So  full  was  the  air  of  all  sorts  of  “bear”  stories  of  enormous  float¬ 
ing  debts,  falsified  earnings  and  over-issues  of  stock,  that  when  I  came  to  Boston  I 
went  at  once  to  the  office  of  the  Company,  there  to  complete  my  inquiries.  I  did  not 
go  to  the  treasurer,  but  as  Mr.  F.  L.  Ames  is  a  friend  of  mine  of  long  and  intimate 
standing,  I  went  to  him  and  told  him  what  I  wanted  to  find  out.  He  at  once  laid 
before  me  the  private  reports  for  the  Committee  of  Directors  bearing  on  these  points, 


INTERNAL  HISTORY  OF  THE  UNION  PACIFIC. 


63 


This  spending  of  money  on  branches  has  given  rise  to  one  of 
the  commonest  accusations  against  the  Union  Pacific ;  namely, 
that  it  diverts  its  funds  from  the  treasury  of  the  main  line,  where 
the  United  States  could  claim  a  share  of  them  as  payments  on 
the  debt  of  the  road  to  the  government,  to  the  treasuries  of  the 
branches,  where  the  government  has  no  rights.  If  it  is  wise  for 
the  Union  Pacific  to  build  branches,  this  is  unjust,  and  it  would 
seem  that  no  student  of  the  railway  situation  in  the  West,  where 
every  road  is  forced  by  the  fierce  competition  for  traffic  to 
extend  its  lines,  could  doubt  the  wisdom  of  this  course.  It 
would  seem  that  the  United  States  as  a  large  creditor  would 
gladly  see  the  Union  Pacific  Company  spend  its  earnings  in  the 
betterment  of  the  property,  rather  than  that  there  should  be  paid 
on  the  debt  of  the  government  5,  or  25,  or  even  50  per  cent,  of 

and  told  me  to  satisfy  myself.  I  had  before  me  ail  that  he  had  to  show.  If  I  wanted 
anything  more  the  original  books  were  at  my  service. 

The  result  of  my  inquiries  has  been  a  curious  insight,  not  into  the  weak  spots  of 
the  Union  Pacific  road  —  these  I  will  say  at  once  have  escaped  me  —  the  insight  has 
been  in  the  ways  and  operations  of  Wall  street.  I  have  studied  the  several  steps  in 
one  grand  organized  raid  of  a  successful  “bear”  campaign.  Plad  I  time  to  follow  it 
out  I  could  make  it  an  account  of  no  little  interest.  I  could  show  the  thorough  knowl¬ 
edge  the  Wall  Street  operators  had  of  the  way  the  stock  was  held,  and  how  they 
based  their  plans  upon  this  knowledge,  so  as  “to  shake  the  weak  stock  out.”  Unlike 
many  other  companies,  the  Union  Pacific,  with  its  600,000  shares,  was  in  no  one’s 
keeping.  A  great  deal  of  the  stock  was  floating  about  or  carried  on  margin.  There 
was  a  grand  chance  fora  “bear”  campaign  and  the  bears  knew  it.  The  stock  list 
shows  how  skillfully,  how  persistently,  and  how  boldly  they  availed  themselves  of  it- 
A  list  of  the  charges  set  afloat  and  of  the  reports  successively  day  by  day  telegraphed 
over  the  country,  especially  to  New  England,  during  the  last  ten  weeks,  would  be  a 
curiosity. 

Meanwhile,  the  point  I  wish  to  make  is  this  :  The  whole  result  of  my  investiga¬ 
tions,  which  have  been  as  thorough  as  I  knew  how  to  make  them,  has  satisfied  me  of 
the  investment  value  of  this  property.  Believing  in  it,  and  having  led  others  to 
invest  in  it,  I  want  to  see  the  control  of  it  in  New  England.  The  Chicago,  Burling¬ 
ton  and  Quincy  and  the  Union  Pacific  constitute  together  the  Broadway  or  Washing¬ 
ton  street  of  this  continent.  They  will  always  be  the  chief  commercial  thoroughfare 
between  Chicago  and  San  Francisco.  Other  lines  will  be  built  through  to  the  north 
and  to  the  south  of  them ;  but  these  will  be  to  the  Union  Pacific  only  what  Third  or 
Sixth  avenues  are  to  Broadway.  At  least  that  is  the  way  it  strikes  me.  Seeing  it  in  this 
light,  the  Union  Pacific  seems  to  me  a  very  valuable  property,  with  a  very  great  future. 
So  far  as  occupying  the  country  is  concerned,  the  policy  the  Company  is  pursuing  is 
a  thoroughly  sound  one.  Its  surplus  earnings  have  for  years  been  invested  and  are 


64 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


those  net  earnings  ;  for  the  ultimate  payment  of  the  debt  depends 
on  the  earning  capacity  of  the  system,  and  o?i  nothing  else. 

Fortunately,  there  is  no  uncertainty  as  to  whether  the  branch 
lines  are,  or  are  not,  valuable  to  the  Union  Pacific  system. 
Charles  Francis  Adams,  who  came  to  the  problem  of  managing 
the  property  rather  with  the  training  of  the  student  than  with 
that  of  the  practical  railway  manager,  caused  the  accounts  for 
the  year  1886  to  be  so  kept  that  the  income  due  to  the  branch 
lines  could  be  separated  from  the  rest.  He  found  that  on  an 
investment  in  branch  lines  of  $45,000,000,  the  actual  profit  to  the 
mainline  on  business  which  they  gave  it  was  $4,952,000,  or  10.95 
per  cent.1  The  question  surely  needs  no  further  discussion. 

A  minor  feature  of  the  question  of  branch  roads  has  given 
rise  to  another  accusation  against  the  Union  Pacific  —  that  it 
has  diverted  funds  from  its  own  treasury  to  the  treasuries  of  its 
branches,  to  avoid  the  payment  of  the  proper  percentage  to  the 
government,  by  means  of  the  “constructive  mileage”  device.2 

now  being  invested  in  feeders.  Under  these  circumstances  an  opportunity  of  securing 
the  control  of  the  property  in  New  England  is  now  offered.  It  is  but  necessary  to 
quietly  take  the  stock  at  the  price  at  which  the  Wall  Street  bears  offer  it.  It  has 
already  been  drifting  to  Boston  in  considerable  quantities.  The  object  of  my  present 
writing  is,  in  so  far  as  I  can,  to  cause  it  to  drift  here  faster.  I  am,  etc., 

Boston,  December  18,  1882.  C.  F.  Adams,  Jr. 

(. Boston  Advertiser  of  December  19,  1882.) 

A  few  days  after  this  remarkable  exhibition  of  naivete ,  the  New  York  Indicator 
commented  as  follows  : 

“  The  discoveries  made  by  Mr.  Adams  in  the  methods  of  Wall  Street  for  making 
and  unmaking  stock  values  may  be  new  to  him,  but  they  are  very  old  to  those  who 
have  been  diligent  students  within  its  classic  shades  —  and  paid  dearly  for  their  tuition. 
If  he  has  been  a  close  student  he  has  learned  that  large  earnings,  valuable  property, 
judicious  management,  a  general  state  of  prosperity,  with  superior  future  prospects, 
go  no  further  in  making  up  stock  values  than  the  machinations  of  a  ring  of  Wall- 
street  operators  who  have  the  money  at  their  command  to  sustain  a  scheme  for  mak¬ 
ing  a  fictitious  market,  and  that  intrinsic  worth  is  not  always  the  base  of  stock  values.” 

But  the  New  England  public,  unlike  the  Indicator ,  put  faith  in  Adams’s  discover¬ 
ies,  and  many  investments  were  made  on  the  strength  of  his  letter.  The  result  was 
of  course  disastrous.  Adams  then  felt  called  upon  to  take  hold  of  the  property  and 
make  good  the  things  he  had  said  of  it.  Hence  his  election  in  1884. 

1  Pacific  Railway  Commission,  pp.  616-17. 

2  When  two  roads  co-operate  in  hauling  freight,  the  sum  received  for  the  service 
maybe  divided  in  proportion  to  the  distance  hauled  by  each — “prorated”;  or  the 


INTERNAL  HISTORY  OF  THE  UNION  PACIFIC. 


6? 


Any  difference  in  the  compensation  for  services  where  two  roads 
co-operate  in  hauling  the  freight  must  be  justified  by  showing 
either  that  the  road  receiving  the  advantage  renders  a  more  valu¬ 
able  service  than  the  other,  or  that  it  renders  the  same  service  at 
a  greater  cost  to  itself.  When  one  of  these  things  has  been 
shown,  it  is  simply  a  question  of  expediency  whether  the  division 
be  on  the  basis  of  the  “rate  prorate,”  the  “arbitrary,”  or  “con¬ 
structive  mileage.” 

Let  us  look  at  the  matter  as  it  pertains  to  the  Union  Pacific 
in  a  concrete  case.  Suppose  a  spur  100  miles  in  length  to  leave 
the  Union  Pacific  500  miles  west  of  Omaha.  Its  traffic  will  be 
gathered  up  at  the  way  stations  and  turned  over  to  the  main  line 
largely  in  car-load  lots,  which  will  be  hauled  continuously  500 
miles.  This  sort  of  traffic  is  the  most  profitable  which  comes  to 
a  railway,  and  if  it  could  not  be  obtained  otherwise  it  would  be 
a  good  investment  for  the  Union  Pacific  to  prorate  it  and  pay 
the  deficits  on  the  branch  road’s  interest  accounts.  But  there  is 
a  better  way  of  dealing  with  the  problem.  It  is  evident  that 
some  advantage  in  the  division  of  the  money  is  due  to  the  branch 
for  these  reasons  :  The  terminal  charges  are  as  heavy  on  the 
spur  as  on  the  main  line,  and  therefore,  because  of  the  difference 
in  the  lengths  of  the  hauls,  they  constitute  a  much  larger  per¬ 
centage  of  the  whole  cost  of  the  service.  Since  the  hauling 
capacity  of  a  spur  is  always  much  less  fully  utilized  than  that 
of  the  main  line,  the  actual  cost  of  the  hauling  part  of  the 
service  would  be  more  per  mile  on  the  spur  than  on  the  main 
trunk,  for  as  the  traffic  increases  the  cost  per  ton -mile  decreases. 
If,  then,  one -sixth  of  the  freight  charges  is  given  to  the  spur, 
it  is  evident  that  it  is  not  getting  its  deserts,  for  it  has  been 
shown  that  the  spur  renders  the  costlier  service.  The  Union 
Pacific  management  recognizes  this  fact,  and  makes  constructive- 
mileage  arrangements  with  the  branch  roads.  This  is  a  practice 

total  charge  may  be  divided  in  proportion  to  the  local  charges  on  the  two  roads  —  the 
“rate  prorate ;  ”  or,  however  large  or  small  the  total  charge  may  be,  one  road  may  get 
a  certain  fixed  sum  —  the  “  arbitrary ;  ”  or  one  road  maybe  given  an  advantage  by 
having  each  mile  of  its  haul  counted  as  more  than  a  mile, — one  and  one-half,  two,  or 
three  miles, —  after  which  the  division  is  prorata.  This  last  is  “  constructive  mileage.’* 


66  HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 

which  has  long  been  used  in  all  parts  of  the  country,  and 
approved  by  all  students  of  railway  practice. 

The  policy  of  building  feeders  was  adopted  as  early  as  1877, 
but  the  great  expenditures  did  not  come  until  after  1880.  Dur¬ 
ing  the  prosperous  years  when  12  or  14  per  cent,  was  being 
earned,  half  of  it,  or  several  millions  of  dollars  each  year,  was 
put  into  the  property. 

The  most  important  of  the  branch  lines  built  in  this  way 
is  the  Oregon  Short  Line.  This  company  was  incorporated  in 
1881,  and  has  a  line  running  from  Moxa,  Wyoming,  a  station 
180  miles  east  of  Ogden,  northwest  to  Huntington,  Oregon, 
where  it  connects  with  the  line  of  the  Oregon  Railway  and  Nav¬ 
igation  Company.  This  extends  from  Huntington  to  Portland, 
whence  steamers  run  north  to  the  cities  of  Puget  Sound  and 
south  to  San  Francisco.  The  Union  Pacific  owns  about  five- 
ninths  of  the  stock  of  the  Oregon  Short  Line,  and  the  Oregon 
Short  Line  owns  a  controlling  interest  in  the  stock  of  the  Oregon 
Railway  and  Navigation  Company. 

This  line  was  projected  because  the  Central  Pacific  had 
begun  to  divert  its  traffic  from  the  Union  Pacific  and  send  it  over 
the  Southern  Pacific  route,  which  made  an  independent  connec¬ 
tion  with  the  coast  seem  desirable.  The  Northern  Pacific  Com¬ 
pany  had  been  provided  for  by  an  Act  of  Congress  of  July  2, 
1864,1 — the  same  day  as  the  passage  of  the  act  which  made 
possible  the  building  of  the  more  southern  group  of  the  Pacific 
railways, —  but  after  seventeen  years  its  line  was  still  incomplete 
and  seemed  likely  to  remain  so.  Therefore,  in  1881,  this  Oregon 
Short  Line  enterprise  was  started.  But  Henry  Villard  suddenly 
appeared  in  the  field,  and  the  Northern  Pacific  had  completed  its 
line  even  before  the  Oregon  Short  Line  was  built.  Thus  the 
traffic  which  it  was  expected  would  follow  one  route  had  to  be 
divided  between  two.  This  system,  although  it  is  an  annual 
charge  upon  the  Union  Pacific  treasury  for  guaranteed  interest,  is 
very  valuable  because  of  the  business  which  it  brings  to  the  parent 
road. 


1 13  Statutes  at  Large,  365. 


INTERNAL  HISTORY  OF  THE  UNION  PACIFIC. 


67 


During  the  first  three  years  of  his  administration,  Adams 
put  $16,000,000  into  the  Union  Pacific  property,  half  of  it  coming 
from  net  earnings  and  half  from  the  sale  of  securities.1  But  he 
was  in  a  losing  fight,  and  later  the  debt  piled  up  in  spite  of 
him.  In  1890  money  had  to  be  had,  and  no  one  but  Gould 
would  furnish  it.  Adams  therefore  stepped  out,  and  the  second 
Gould  regime  began. 

A  change  in  management,  however,  could  not  save  the  road. 
Competition  has  been  carried  so  far  in  the  railway  world  that 
the  rates  now  in  effect  do  not  afford  a  fund  for  insurance  against 
unexpected  misfortunes,  and  the  bad  season  of  1893  brought  to 
the  Union  Pacific  its  legitimate  effect  and  threw  it  into  the  hands 
of  receivers.  Some  roads,  not  so  heavily  handicapped  as  to 
interest  charges,  escaped  with  the  cutting  down  or  the  annihila¬ 
tion  of  dividends.  For  the  Union  Pacific  there  was  no  hope,  and 
now,  instead  of  being  a  strong  moving  factor  in  the  industrial 
world,  it  is  an  inert  mass  of  assets,  held  together  to  protect  the 
creditor  until  a  reorganization  can  be  effected. 

1  Pacific  Railway  Commission,  p.  85. 


CHAPTER  VI. 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 

A  brief  outline  of  the  history  of  the  Pacific  railway  project 
has  now  been  given.  It  remains  to  fill  in  that  outline  with  several 
sets  of  facts  which  have  purposely  been  kept  in  the  back¬ 
ground  heretofore  in  order  that  each  of  the  topics  to  which  they 
relate  might  be  treated  as  a  complete  whole  and  in  its  proper 
relations.  This  chapter  is  to  be  devoted  to  three  such  sets  of 
facts  which  are  so  intertwined  that  it  seems  inadvisable  to 
separate  them, —  the  changes  in  public  opinion,  legislation,  and 
litigation. 

The  Pacific  railways,  being  from  their  origin  and  from  the 
nature  of  their  charters  much  more  nearly  public  institutions 
than  other  American  railways,  have  been  particularly  sensitive  to 
the  fluctuations  of  public  opinion.  Concerning  this  group,  there¬ 
fore,  much  more  than  concerning  any  other  of  our  railways, 
public  opinion  has  crystallized  into  legislation.  From  this  fact, 
in  turn,  springs  one  of  the  most  unfortunate  features  of  the 
Pacific  railway  problem, —  the  constant  necessity  of  taking  these 
laws  which  govern  the  relations  between  the  creditor-government, 
and  its  creature,  the  road,  into  court  for  interpretation.  These 
suits,  even  when  brought  in  the  most  friendly  spirit, —  the  courts 
being  the  only  places  where  these  differences  of  opinion  as  to 
interpretation  can  be  settled, —  give  an  air  of  antagonism  between 
the  roads  and  the  government. 

How  the  desire  for  a  Pacific  railway  spread  from  individuals 
to  communities,  from  communities  to  whole  states,  and  how  the 
states,  speaking  through  their  legislatures,  forced  the  considera¬ 
tion  of  the  project  upon  Congress,  has  been  briefly  noted.5  In 

5  Chapter  i. 


4 


68 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


69 


order  to  a  full  understanding  of  the  problem  of  the  Pacific  rail¬ 
ways  it  is  necessary  also  to  note  the  trend  of  public  opinion  at 
various  later  times,  those  at  which  important  legislation  was  had. 
This  is  not  for  the  sake  of  interpreting  those  laws,  for  the  courts 
properly  look  only  to  the  contents  of  the  laws  themselves  for 
that.  It  is  for  the  sake  of  getting  a  proper  point  of  view  for  the 
determination  of  what  shall  be  the  course  of  future  legislation. 
Passing  over,  then,  the  early  agitation,1  it  is  necessary  to  know 
what  men  thought  of  the  Pacific  railway  when  the  Act  of  1862 
was  under  discussion. 

The  terms  of  the  Act  of  1862  show  that  a  majority  of  the 
members  of  the  Thirty-seventh  Congress  thought  that  the  Pacific 
railway  would  be  a  financial  success.  There  was,  however,  a 
number  by  no  means  small  who  thought  just  the  opposite.2 

1  In  the  discussions  which  were  had  over  the  rather  crude  propositions  of  the 
period  before  the  war,  there  appear  all  sorts  of  reasons  for  and  against  the  project, 
every  variety  of  opinion  as  to  the  powers  and  duties  of  the  government,  all  grades  of 
knowledge  and  of  ignorance  of  the  matter  in  hand,  much  of  far-sighted  patriotism, 
and  unfortunately  much  of  its  lack.  The  first  arguments  for  a  road  were,  as  has  been 
said,  commercial,  and  only  secondarily  political.  These  were  strong  enough  to  induce 
a  vigorous  agitation  very  early  —  long  before  the  Oregon  question  had  been  settled.  At 
the  close  of  the  Mexican  War,  when  our  Pacific  coast  line  was  more  than  doubled,  these 
commercial  arguments  got  added  strength.  With  the  discovery  of  gold  in  California 
and  the  consequent  great  immigration  from  the  eastern  states  to  the  coast,  the  demands 
for  a  road  grew  still  stronger. 

2  Mr.  Lane  of  Kansas  :  “  I  am  one  of  the  senators  who  believe  that  this  road,  when 
completed,  will  be  one  of  the  great  paying  thoroughfares  of  the  world  ...” 

Mr.  Clark  of  New  Hampshire  :  “  That  only  shows  how  we  differ.  The  senator 
from  Kansas  thinks  it  will  be  a  good  paying  road.  1  believe  that  if  the  good  God 
were  to  make  that  road  for  you,  right  through,  you  could  not  form  a  company  in  the 
country  today  that  would  run  it  without  failure.  .  .  .  Whether  I  am  right  or  not,  I  do 
not  build  the  road  because  I  think  it  is  to  be  a  paying  road  ;  I  build  it  as  a  political 
necessity,  to  bind  the  country  together  and  to  hold  it  together,  and  I  do  not  care 
whether  it  is  to  pay  or  not ;  here  is  the  money  of  the  government  to  build  it.” — Thirty- 
seventh  Congress,  second  session,  p.  2788. 

Mr.  Morrill  of  Vermont :  “  I  am  not  to  be  deceived  by  any  promises  that  this  road 
is  to  be  built  and  run  by  any  party  but  the  United  States.  Every  dollar  that  it  takes 
to  construct  the  road  is  to  be  contributed  by  the  United  States.  There  is  not  a  cap¬ 
italist  who  will  invest  a  dollar  in  it  if  he  is  to  be  responsible  for  its  construction  for 
any  considerable  distance.  .  .  .  As  a  commercial  or  economical  question,  such  a  road 
is  utterly  defenseless  ;  but  as  a  national  question,  it  has  great  merits,  which  in  due  time 
will  be  recognized.” — Thirty-seventh  Congress,  second  session,  p.  1708. 


70 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Others,  while  acknowledging  that  the  road  was  unlikely  to  pay 
for  itself  directly, —  i.  e.,  to  repay  the  debt, —  thought  that  it 
would  indirectly  prove  a  good  investment  by  the  saving  which 
it  would  effect  on  the  expenses  of  carrying  the  mails,  on  the  bills 
of  the  army,  and  in  other  ways.1  In  support  of  this  position 
they  pointed  to  the  excessive  charges  for  carrying  the  mails  by 
stage  and  pony  express,  the  methods  then  in  use,  upon  which  a 
large  saving  could  surely  be  made  as  soon  as  a  road  was  built.2  But 

Mr.  Wilson  of  Massachusetts  :  “  I  have  studied  the  railroad  system  of  this  country, 
and  its  conditions,  and  I  make  the  prediction  here  today,  and  let  it  go  upon  the  record, 
that  the  man  is  not  born  in  this  country  who  will  ever  see  this  nation  get  back  this 
money.  It  is  an  impossibility.  The  road  will  never  be  worth  it.” — Thirty-seventh 
Congress,  second  session,  p.  2757. 

Mr.  White  of  Indiana:  “Now,  sir,  I  contend  that,  although  this  bill  provides  for 
the  repayment  of  the  money  advanced  by  the  government,  it  is  not  expected  that  a 
cent  of  the  money  will  ever  be  repaid.  ...  I  undertake  to  say  that  not  a  cent  of  these 
advances  will  ever  be  repaid,  nor  do  I  think  it  desirable  that  they  should  be  repaid. 
This  road  is  to  be  the  highway  of  the  nation.  ...  I  think,  therefore,  that  this  will  turn 
out  a  mere  bonus  to  the  Pacific  railroad,  as  it  ought  to  be.” — Thirty-seventh  Congress, 
second  session,  p.  1891. 

Mr.  Wilson  of  Massachusetts  :  “I  have  little  confidence  in  the  estimates  made  by 
Senators  or  Members  of  the  House  of  Representatives  as  to  the  great  profits  that  are  to 
be  made,  and  the  immense  business  that  is  to  be  done  by  the  road.  I  give  no  grudg¬ 
ing  vote  in  giving  away  either  money  or  land.  I  would  sink  $100,000,000  to  build  the 
road,  and  do  it  most  cheerfully,  and  think  I  had  done  a  great  thing  for  my  country  if 
I  could  bring  it  about.  What  are  seventy-five  or  one  hundred  millions  in  opening  a 
railroad  across  the  central  regions  of  this  country  that  shall  connect  the  people  of  the 
Pacific  and  Atlantic,  and. bind  us  together?  Nothing.” — Thirty-seventh  Congress 
second  session,  p.  2754. 

*Mr.  Wilson  of  Massachusetts:  “Sir,  I  repeat  what  I  have  before  said,  that  in 
voting  for  this  bill  and  this  appropriation  of  $116,000,000,  I  vote  with  the  conviction 
that  this  sum  of  money  is  to  go  for  the  general  interests  of  the  country,  and  that  we 
never  can  expect  it  back  in  the  treasury.  If  the  interest  on  these  bonds,  from  the  time 
the  road  commences,  forever,  can  be  paid  by  the  services  the  road  renders  the 
country,  it  is  as  much  certainly  as  I  can  expect.  I  vote  for  the  road  with  that  expecta¬ 
tion  and  that  understanding.” — Thirty-sixth  Congress,  second  session,  p.615. 

Mr.  Wilson  of  Massachusetts :  “  I  vote  for  the  bill  with  the  expectation  that  all 
we  get  out  of  the  road  —  and  I  think  that  it  is  a  great  deal  —  will  be  the  mail  carrying 
and  the  carrying  of  munitions  of  war,  and  such  things  as  the  government  may  need, 
and  I  vote  for  it  most  cheerfully  with  that  view.” — Thirty-seventh  Congress,  second 
session,  p.  2757. 

2  Question.  Have  you  any  recollection,  Mr.  Dey,  by  which  you  can  state  what  the 
prevailing  rate  of  wagon  transportation  was  from  the  Missouri  River  to  the  west  ? 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


71 


this  item  was  insignificant  when  compared  with  the  expense  for 
Indian  fighting  armies.  The  great  plains  were  the  breeding 
grounds  of  almost  interminable  Indian  wars,  and  it  was  argued 
that  the  railway  furnished  the  only  possible  solution  of  the  vexing 
Indian  problem.  When  troops  could  be  rapidly  and  surely  trans¬ 
ported  from  one  post  to  another,  a  much  smaller  force  would  be 
adequate  for  policing  the  Indian  country,  and  it  was  argued  that 
the  saving  on  army  bills  would  equal  the  interest  on  the  debt 
which  the  government  would  have  to  assume  to  secure  a  road.1 


Answer.  Yes,  sir.  Q.  If  you  can,  please  state  it.  A.  To  supply  my  parties  I  paid 
from  16  to  20  cents  a  pound  for  freight  from  the  Missouri  River  to  points  on  the  Black 
Hills,  north  of  Denver.  I  paid  25  cents  a  pound  for  the  rations  to  support  my  men 
out  to  Fort  Saunders,  and  I  paid  30  cents  for  freight  that  I  sent  to  Salt  Lake  to  supply 
my  men.  I  might  have  paid  a  little  more  than  the  average  price,  but  I  think  not.  I 
loaded  my  teams  with  all  the  supplies  that  they  could  manage  to  carry,  and  then  I  left 
supplies  at  various  points  that  were  accessible  to  them  when  they  were  making  their 
surveys.  About  30  cents  a  pound  to  Salt  Lake  was  as  low  as  I  have  heard  of  its 
being  done.  Q.  That  was  in  what  year  ?  A.  1863  and  1864.  Q.  How  was  transporta¬ 
tion  conducted?  A.  By  teams  —  cattle,  mules,  and  horses. — Testimony  of  Peter  A. 
Dey  before  the  Pacific  Railway  Commission  of  1887. — Pacific  Railway  Commission , 
P-  1430. 


1  In  response  to  a  resolution  of  the  House,  Secretary  of  War  Stanton  presented  a 
table  showing  the  amounts  paid  by  the  Quartermaster  General  during  the  fiscal  years 
1857-1861  for  the  transportation,  between  the  Mississippi  River  and  the  Pacific  Ocean, 
of  troops  and  supplies.  The  sums  were  : 

1857  . . .  $2,101,367.31  i860 .  $2,160,588.27 

1858  .  3,961,848.40  1861 .  i,503,799-09 

1859  .  4,319,550.95  - 


$14,047,154.02 

The  Secretary  stated  that  these  figures  did  not  cover  all  the  freightage  paid,  and, 
by  reference  to  other  sources  of  information,  the  additional  sums  were  found  to  be,  in 
1858,  $4,000,000  ;  in  1859,  $3,000,000  ;  in  i860,  $1,500,000 ;  in  1861,  not  ascertained  ; 
for  1862,  estimated,  at  least  $6,000,000.  Thus  it  was  estimated  that  the  annual  bill  for 
army  transportation  would  be  nearly  $6,000,000,  and  that  the  postal  service  would  cost 
$1,500,000  more.  Adding  the  sums  paid  out  for  transportation  of  naval  supplies,  the 
sum  would  be  over  $7,000,000  per  annum. 

These  facts  were  presented  in  a  speech  by  Mr.  Campbell  of  Pennsylvania. — 
Thirty-seventh  Congress,  second  session,  pp.  1578-9. 

Mr.  Latham  of  California  :  “Official  reports  and  other  authoritative  data  show 
that  the  average  annual  cost,  even  in  times  of  peace,  in  transportation  of  troops,  with 
munitions  of  war,  subsistence  and  quartermaster’s  supplies,  may  be  set  down  in  round 
numbers  at  $7,300,000.  The  interest  upon  the  credit  loan  of  $65,000,000  of  bonds 
will  be  annually  $3,900,000,  leaving  a  net  excess  of  $3,400,000  over  the  present  cost.” — 
Thirty-seventh  Congress,  second  session,  pp. 2676-7. 


7  2 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Although  these  arguments  touching  the  purse  were  potent 
enough  to  make  it  certain  that  a  road  would  eventually  be  built, 
reasons  of  quite  another  sort  induced  the  taking  up  of  the  task 
at  the  particular  time  when  it  was  taken  up  —  a  time  than  which 
none  more  unfavorable  could  have  been  chosen.  The  decisive 
arguments  were  political.  The  struggle  of  1850  to  determine 
whether  California  should  be  slave  or  free  territory  was  not  for¬ 
gotten,  and  with  the  outbreak  of  the  war  there  arose  the  danger 
that  the  large  southern  element  would  again  come  to  the  surface 
and  succeed  in  throwing  the  influence  of  the  state  on  the  side  of 
the  South.  This  could  be  prevented  by  railway  connection  with 
the  free  states. 

Still  more  important  than  this  menace  from  within  was  one 
from  without.  There  was  good  evidence  that  if  the  Trent  affair 
had  ended  in  open  rupture  between  the  United  States  and  England, 
the  British  fleet  on  the  Pacific  would  immediately  have  struck  at 
San  Francisco,  and,  in  the  then  isolated  position  of  the  coast, 
nothing  could  have  prevented  the  success  of  such  an  assault.1 

These,  then,  were  the  reasons  for  the  enactment  of  the  Act 
of  1862.  It  was  a  war  measure,  put  through  when  the  nation 
was  in  imminent  danger  of  disruption,  and  as  such  it  should  be 
judged.  This  is  a  fact  which  is  too  often  lost  sight  of. 

During  the  next  two  years  there  came  no  changes  in  the 
state  of  affairs  to  lessen  the  demand  for  a  road.  It  was  still  con¬ 
sidered  a  national  necessity.  The  costliness  of  railway  building 
and  the  high  prices  consequent  on  the  war  kept  capitalists  from 
taking  hold  of  the  enterprise.2  On  the  other  hand,  the  lavish 
expenditures  of  the  government  made  necessary  by  the  war  pro¬ 
duced  in  the  minds  of  many  congressmen  a  feeling  that  immense 
expenditures  were  the  natural  and  legitimate  thing,  and  the  gen- 

1  Mr.  Sargent,  of  California  :  “I  know  the  fact  to  be  that  during  the  pendency  of 
the  Trent  difficulty  warning  was  sent  by  an  eminent  Californian,  then  in  England,  that 
orders  had  gone  out  to  the  British  Pacific  fleet  to  strike  at  San  Francisco  as  soon  as 
news  arrived  of  the  commencement  of  hostilities.” — Thirty-seventh  Congress,  second 
session,  p.  1595*  Although  it  has  since  proved  that  this  was  a  false  alarm,  it  was 
temporarily  a  potent  factor  in  the  case. 

2  See  page  17,  above. 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


73 


erosity  to  the  Pacific  railways  is  but  one  evidence  among  many 
of  this  feeling. 

The  call  for  a  railway  to  the  Pacific  continuing  strong  and 
unmistakable,  the  Act  of  1864  was  passed.  This  move  was 
approved  by  the  country  at  large,  and  the  men  who  undertook 
the  building  of  the  road  were  almost  universally  applauded.  The 
rising  tide  of  approval  seems  to  have  left  its  high-water  mark  in 
a  resolution  passed  by  the  House  of  Representatives  December 
13,  1865,  directing  the  Committee  on  the  Pacific  railroad  to 
inquire  what  further  legislation  was  necessary  to  expedite  the 
building  of  the  road.1 

When  the  war  came  to  an  end,  the  expenditures  of  the  gov¬ 
ernment  settled  back  somewhat  from  their  abnormal  level.  By 
the  end  of  1868  there  began  to  be  a  closer  inspection  of  all  kinds 
of  appropriations,  and  April  5,  1869, —  five  weeks  before  the 
Union  Pacific  and  the  Central  Pacific  met  at  Promontory  Point, — 
there  was  raised  in  Congress  the  first  warning  voice  against  the 
Credit  Mobilier  as  a  corrupt  concern.2  Although  from  this  time  on 
frequent  accusations  along  the  same  line  were  made  in  the  legis¬ 
lative  halls,  the  country  at  large  did  not  take  up  the  cry  until 
considerably  later. 

Four  days  after  this  first  arraignment  of  the  Credit  Mobilier, 
on  the  9th  of  April,  1869,  congressional  distrust  of  the  man¬ 
agement  of  the  Pacific  railways  was  still  further  evinced  by  the 
passage  of  a  joint  resolution  calling  for  the  appointment  of  a 
commission  “of  eminent  citizens”  to  examine  the  roads  of  the 
Union  Pacific  and  the  Central  Pacific  companies  for  the  sake  of 
ascertaining  whether  they  fulfilled  the  requirements  of  law,  and 
also  to  learn  what  further  expenditures  were  needed  to  make 
them  first-class  roads.3  In  August  the  President  appointed  five 
men  to  constitute  this  commission,  and  its  report  was  given  Octo¬ 
ber  30,  1869.  This  specified  the  improvements  which  were  needed, 

1  Thirty-ninth  Congress,  first  session,  p.  49. 

2  Forty-first  Congress,  first  session,  pp.  503-4. 

3  Forty-first  Congress,  first  session,  pp.  677,  703-4.  Resolution  approved  April  10, 
1869. — 16  Statutes  at  Large,  56. 


74 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


and  estimated  the  necessary  expense  at  $1,586,100  for  the  Union 
Pacific,  and  $4,493,380 1  for  the  Central  Pacific.  Subsequently 
another  commission  was  appointed  to  see  if  the  requisite  improve¬ 
ments  had  been  made.  This  reported,  October,  1874,  that  the 
Union  Pacific  had  spent  $3,596,075.79,  and  the  Central  Pacific 
$5,121,037.23,  instead  of  the  sums  required.2 

The  proper  representatives  of  the  government,  commission¬ 
ers  appointed  for  that  purpose,  had  from  time  to  time  examined 
the  completed  sections  of  the  Pacific  railways,  and  sworn  that 
they  fulfilled  the  requirements  of  the  charter  acts.  The  last  sec¬ 
tions  were  accepted  thus,  July  15,  1869.3  The  action  of  April  9 
and  10,  however,  expressed  the  doubt  of  the  government  as  to 
the  reliability  of  the  reports  received  up  to  that  time  and  called 
for  a  re-examination  of  the  whole  road.4  Consistent  with  this 
later  action,  the  Secretary  of  the  Interior  gave  an  order  Novem¬ 
ber  3,  1869,  to  the  Commissioner  of  the  General  Land  Office  to 
withhold  the  patents  for  one-half  of  the  lands  then  ready  to  be 
given  to  the  Union  Pacific,  on  the  ground  that  the  road  was  not 
yet  completed.5  This  order  was  continued  in  force  five  years,  its 
withdrawal  being  consequent  on  the  report  of  a  commission 
appointed  May  1874,  reporting  during  the  following  November, 
that  the  road  had  been  completed  according  to  law,  October  I, 
1874.6  According  to  the  official  utterances  of  the  government 
this  was  the  last  time  that  the  road  was  completed  ! 

As  the  subsidy  of  the  Pacific  railways  consisted  of  United 
States  bonds,  the  interest  thereon  was,  of  course,  demandable  of 
the  United  States  treasury.  The  question  whether  the  govern¬ 
ment  could  demand  from  the  companies  the  current  repayment 
of  this  interest  was  raised  by  a  requisition  for  such  interest  made 

1  Report  on  the  Pacific  Railroad ,  May  14,  1869,  p.  25. 

$  Ibid.,  p.  11.  4  See  page  73  above. 

3  Pacific  Railway  Commission ,  pp.  4255-6.  5  99  U.  S.  416. 

6  A  further  evidence  of  the  distrust  of  the  government  is  found  in  19  Statutes  at 
Large ,  169.  The  sum  of  $10,000  was  appropriated  to  re-survey  the  roads,  on  the 
supposition  that  the  subsidy  had  been  paid  for  more  road  than  existed.  By  this 
re-survey  the  Union  Pacific  was  shown  to  be  1,247  miles,  and  the  Central  Pacific,  951 
miles  longer  than  reported. — Ex.  Docs.,  Forty-fourth  Congress,  second  session,  No. 
38,  p.  9. 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


75 


September  3,  1870.  The  Act  of  1862  said  that  the  principal  of 
the  bonds  and  the  interest  thereon  should  be  a  debt  of  the  compa¬ 
nies,  for  securing  the  payment  of  which  the  government  should 
have  a  mortgage  on  the  bond-aided  portions  of  the  roads,  not 
specifying  different  dates  for  the  maturity  of  the  two  parts  of  the 
debt.  While  the  Act  of  1862  was  being  framed,  attention  was 
called  to  the  fact  that  the  payment  of  interest  was  postponed 
until  the  maturity  of  the  principal,  and  an  insertion  was  proposed 
to  change  this.  But  Congress  consciously,  intentionally,  and 
definitely  refused  to  require  the  companies  to  pay  the  interest 
as  it  fell  due.1  The  companies  therefore  refused  to  comply  with 
the  demand.  The  Attorney  General  upheld  the  position  of  the 
Treasury  Department  and  asserted  the  further  right  to  withhold 
payment  for  all  services  rendered  by  the  roads  to  the  govern¬ 
ment.  This  was  done.  The  matter  then  came  up  in  Congress, 
and  an  act  was  passed  approving  the  action  of  the  companies  and 
directing  the  Secretary  of  the  Treasury  to  pay  in  cash  the  one- 
half  compensation  due  according  to  the  provisions  of  the  law.2 
Two  years  later,  however,  Congress  directed  the  withholding  of 
this  compensation  for  services,  at  the  same  time  providing  that 
the  companies  might  sue  for  the  amounts  involved  in  the  Court 
of  Claims.3  Advantage  of  this  privilege  was  taken,  and  the  court 
decreed  that  the  government  must  pay  the  sums  which  it  was 
holding  back.  Not  a  great  while  after  this  decision  had  been 
affirmed  by  the  supreme  court  of  the  United  States,4  a  new  law 
was  framed  which  altered  materially  the  status  of  the  roads. 
Consideration  of  that,  however,  must  be  postponed  for  the  pres¬ 
ent. 

While  the  whole  country  was  clamoring  for  the  completion 
of  the  Pacific  railway,  there  seemed  to  be  no  thought  that  the 
Credit  Mobilier,  which  was  supposed  to  be  playing  a  large  part 
in  pushing  forward  the  Union  Pacific  enterprise,  was  anything 

1  Thirty-seventh  Congress,  second  session,  p.  1911. 

2  16  Statutes  at  Large ,  525,  sec.  9.  99  U.  S.  72  also  decided  that  the  interest  was 

due  from  the  companies  at  the  maturity  of  the  principal,  not  as  it  accrued. 

317  Statutes  at  Large ,  508,  sec.  2.  4  99  U.  S.  72. 


76 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


but  a  highly  commendable  concern.  But  when  success  was 
assured  and  profits  were  in  sight,  there  began  to  arise  murmurs 
of  disapproval.  The  American  company  with  the  foreign  name 
borrowed  bad  repute  from  the  Credit  Mobilier  of  France. 

The  unfavorable  allusions  in  Congress,  which  began  in  April 
1869,  were  made  chiefly  by  men  who  but  poorly  understood  the 
connection  between  the  Union  Pacific  and  the  Credit  Mobilier. 
Their  condemnatory  opinions,  however,  gradually  permeated  the 
public  mind.  Then  came  the  presidential  campaign  of  1872, 
when  everything  which  could  be  made  to  furnish  political  capital 
was  eagerly  seized  upon,  and  naturally  the  Credit  Mobilier  did 
not  escape  notice.  Charges  of  corruption  connected  therewith 
were  made  against  prominent  politicians  so  late  that  lack  of  time 
rendered  adequate  explanations  impossible.  If  explanations 
could  not  be  given,  the  only  alternative,  politically  speaking, 
was  denial  of  all  connection  with  the  concern.  Such  denials 
were  made,  and  they  carried  with  them  necessarily  an  arraign¬ 
ment  of  the  Credit  Mobilier  as  corrupt.  The  reactionary  feeling 
against  the  prodigal  expenditures  and  loose  methods  of  the  war 
period,  when  constitutional  provisions  were  construed  in  the 
broadest  manner  possible  and  the  ordinary  rules  of  business 
morality  gave  way  before  the  startlingly  new  conditions,  was  wide¬ 
spread.  Add  to  this  the  extravagant  statements  of  the  cam¬ 
paign,  and  an  investigation  of  the  Credit  Mobilier  was  inevitable. 
Individual  congressmen  whose  names  had  been  connected  with 
it  demanded  vindication  ;  others  thought  they  saw  a  chance  to 
blacken  their  opponents  ;  none  dared  to  vote  against  the  pro¬ 
posed  movement  lest  they  thereby  compromise  themselves. 

The  House  of  Representatives/therefore,  passed  a  resolution 
December  2,  1872,  providing  for  a  committee  of  five  “to  investi¬ 
gate  whether  any  member  of  this  House  was  bribed  by  Oakes 
Ames,  or  any  other  person  or  corporation,  in  any  matter  touch¬ 
ing  his  legislative  duty.”1  This  committee,  the  Poland  Com¬ 
mittee,  began  its  work  December  12,  1872,  and  took  its  last 
testimony  February  19,  1873. 2  Under  a  resolution  of  January  6, 

‘Forty-second  Congress,  third  session,  p.  11.  2  See  p.  19  above. 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


77 


1873,  a  second  committee  of  the  House,  the  Wilson  Committee, 
was  given  the  task  of  investigating  the  connection  between  the 
Credit  Mobilier  and  the  Union  Pacific.  Its  first  sitting  was  held 
January  10,  1873,  and  it  likewise  heard  its  last  testimony 
February  19,  1873. 1 

The  testimony  elicited  by  the  Poland  Committee  showed  that 
Oakes  Ames  was  an  extremely  unsystematic  business  man,  care¬ 
less  as  to  details.  The  discrepancies  between  his  scanty  records 
and  those  of  the  men  with  whom  he  dealt  were  easily  made  to 
appear  to  hide  dishonesty.  He  was  also  shown  to  be  a  man  who 
was  very  unlikely  to  hide  his  meaning  in  phrases  intentionally 
ambiguous.  But  his  careless  expressions  were  of  just  the  sort 
which  could  most  easily  be  made  to  appear  full  of  evil  meaning. 
He  gave  the  committee  in  their  attempt  to  get  to  the  bottom  of 
the  matter  every  possible  assistance,  except  when  by  holding 
back  it  seemed  to  him  possible  to  shield  another.  As  to  his  own 
asserted  guilt  he  was  perfectly  open.  Other  congressmen  who 
were  implicated  testified  with  equal  candor,  and  those  who  made 
any  attempts  at  concealment  only  hurt  themselves  thereby. 

It  appears  from  the  Poland  Committee  investigations  that 
Oakes  Ames,  after  he  began  to  take  an  interest  in  the  Union 
Pacific  enterprise,  tried  to  connect  influential  men  with  it.  To 
that  end  he  tried  to  get  men  of  means  both  in  and  out  of  Con¬ 
gress  to  take  shares  in  the  Credit  Mobilier.  In  order  that  a  lack 
of  ready  money  might  not  deter  them  from  investing,  he  agreed 
with  some  of  his  friends  to  hold  stock  for  them  without  any 
payment  in  hand.  Others  he  guaranteed  against  loss,  as  Durant 
had  done  when  securing  Union  Pacific  stock  subscriptions.  The 
record  of  these  transactions  Ames  kept  in  a  small  memorandum 
book  which  he  carried  in  his  pocket.  It  is  not  strange  that  dis¬ 
agreements  should  arise  over  the  terms  of  contracts  thus  recorded. 
Before  the  letting  of  the  Ames  contract  numerous  promises  of 
Credit  Mobilier  stock  at  par  had  been  made.  Later,  when  success 
seemed  in  sight,  many  came  to  Ames  for  stock  which  they  said 
had  been  promised  them,  for  now  it  had  suddenly  acquired  a 

1  See  p.  17  above. 


78 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


high  value.  It  was  selling  this  stock  previously  promised,  at  the 
rate  agreed  upon  —  par, —  which  constituted  Ames’s  offense. 
Doubtless  he  found  it  advisable  to  sell,  and  did  sell,  Credit 
Mobilier  stock  where  definite  bargains  had  not  been  made.  He 
certainly  wanted  the  Union  Pacific  to  have  friends  in  Congress. 
But  there  was  no  legislation  then  pending,  there  was  none  pro- 
posed,  there  was  none  wanted. 

The  Poland  Committee  said  in  its  report:  “In  his  negotia¬ 
tions  with  these  members  of  Congress  Mr.  Ames  made  no  sug¬ 
gestion  that  he  desired  to  secure  their  favorable  influence  in 
Congress  in  favor  of  the  railroad  company.”1  “The  committee 
have  not  been  able  to  find  that  any  of  these  members  of  Con¬ 
gress  have  been  affected  in  their  official  action  in  consequence 
of  their  interest  in  Credit  Mobilier  stock.”2  “The  committee 
do  not  find  that  either  of  the  above-named  gentlemen,  in  con¬ 
tracting  with  Mr.  Ames,  had  any  corrupt  motive  or  purpose  him¬ 
self,  or  was  aware  that  Mr.  Ames  had  any.”3  “The  committee 
find  nothing  in  the  conduct  or  motives  of  either  of  these  mem¬ 
bers,  in  taking  this  stock,  that  calls  for  any  recommendation  by 
the  committee  of  the  house.”4 

The  report  of  the  committee  then  proceeded  to  quote  the 
statute  against  bribery,  and  asserted  that  Oakes  Ames  had  laid 
himself  liable  to  its  penalties.  It  therefore  recommended  his 
expulsion  from  Congress  —  for  a  transaction  which  constituted 
bribery,  but  in  which  only  one  party  was  in  any  way  guilty. 

Mr.  James  Brooks,  a  member  from  New  York,  was  asserted 
by  the  committee  to  have  procured  certain  shares  of  Credit 
Mobilier  stock  which  were  meant  to  influence  his  action  as  a 
member  of  Congress  and  as  a  government  director  of  the  Union 
Pacific,  he  knowing  that  they  were  meant  thus  to  influence  his 
action.  The  recommendation  was  for  his  expulsion  likewise. 
The  testimony  does  not  seem  fully  to  establish  the  charge  against 
Brooks. 

Anticipating  the  attack  which  would  be  made  on  these 


1 P.  viii. 
2  P.  viii. 


3P.  ix. 
<  P.  X. 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


79 


recommendations,  the  committee  gave  up  a  considerable  section  of 
their  report  to  a  defense  of  their  right  to  deal  thus  with  Ames 
and  Brooks.  The  Judiciary  Committee  of  the  House,  to  which 
the  testimony  taken  by  the  Poland  Committee  was  referred 
‘‘with  instructions  to  inquire  whether  anything  in  such  testimony 
warrants  articles  of  impeachment  of  any  officer  of  the  United 
States  not  a  member  of  this  House,”  gave  a  report  in  which  it 
was  made  very  evident  that  the  House  had  no  jurisdiction  in  the 
case  at  all,  the  alleged  offenses  having  been  committed  before 
the  existence  of  the  then  House.1  This  may  in  part  account  for 
the  fact  that  the  House,  instead  of  expelling  Ames  and  Brooks, 
censured  them.  But  if  it  had  a  right  to  censure,  it  had  an 
equally  good  one  to  expel.  Be  that  as  it  may,  within  a  few 
months  both  Ames  and  Brooks  had  carried  their  loads  of  dis¬ 
grace  into  the  grave  —  a  fact  of  no  importance  in  the  case,  but  one 
which  accentuates  the  poetic  injustice  of  the  whole  proceeding. 

The  Wilson  Committee  was  appointed  because  the  public 
believed  that  immense  profits  had  been  made  by  the  builders  of 
the  Union  Pacific  and  disposed  of  improperly  through  the  Credit 
Mobilier.  It  investigated  thoroughly,  but,  like  the  Poland  Com¬ 
mittee,  with  preconceived  notions  always  in  mind.  Both  com¬ 
mittees  took  testimony  so  voluminous  that  neither  the  members 
of  Congress  nor  the  newspaper  men  nor  the  ordinary  student  of 
current  affairs  could  hope  to  digest  it.  That  the  committees 
themselves  did  not  digest  it  is  shown  by  various  statements 
incorporated  into  their  reports  which  the  testimony  does  not 
bear  out  at  all.  The  country  demanded  condemnatory  reports 
from  the  committees,  and  it  got  them.  The  widespread  jobbery 
of  the  war  period  had  to  be  denounced,  and  the  Credit  Mobilier 
case  presented  the  occasion  for  such  a  denunciation.  It  was  an 
evidence  of  a  change  of  attitude  by  the  public,  of  an  aroused 
public  conscience.  If  the  spirit  of  reform  had  not  taken  this 
mode  of  expression  it  would  have  found  some  other. 

The  work  of  the  Credit  Mobilier  was  complete  when  it  had 
carried  out  its  first  and  last  contract  for  building  the  Union 

1  Forty-second  Congress,  third  session,  p.  1651. 


8o 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Pacific  road  from  Omaha  to  the  one-hundredth  meridian.  But 
its  capacity  for  causing  trouble  was  far  from  being  filled  at  that 
juncture.  Careful  business  methods  were  not  a  part  of  the 
equipment  of  the  projectors  of  the  Union  Pacific,  and  when  the 
great  work  was  done  there  was  no  settling  up  of  accounts.  A 
claim  was  therefore  made  by  the  Credit  Mobilier  that  certain 
large  sums  of  money  were  still  due  to  it  from  the  Union  Pacific, 
and  this  claim  was  not  settled  until  Jay  Gould  came  into  control 
of  the  road.  He  thought  that  the  holders  of  the  Credit  Mobilier 
stock  ought  to  turn  their  shares  into  the  hands  of  the  Union 
Pacific,  thus  carrying  the  claim  back  into  the  Union  Pacific 
treasury.  Some  agreed  to  do  this  if  the  rest  would  follow  their 
example,  but  the  solution  could  not  be  effected  thus.  A  com¬ 
mittee  was  finally  appointed  to  adjust  a  settlement  between  the 
two  organizations.  The  Union  Pacific  contention  was  that  the 
contract  with  the  Credit  Mobilier  had  been  an  illegal  one,  and 
that  therefore  a  refunding  of  the  profits  thereon  could  be  called 
for.  By  balancing  these  claims  against  one  another,  an  agree¬ 
ment  was  come  to  whereby  mutual  releases  were  given,  and  the 
Credit  Mobilier  at  last  ceased  to  be  a  disturbing  element. 

After  the  Credit  Mobilier  investigations,  the  next  important 
evidence  of  popular  distrust  of  the  Pacific  railways  and  ani¬ 
mosity  toward  them  was  the  Thurman  Act,  which  became  a  law 
May  7,  1878. 1 

The  Act  of  1862  had  provided  that  5  per  cent,  of  the  net 
earnings  of  the  roads  should  be  applied  toward  liquidating  the 
debts  to  the  government.  It  had  also  provided  that  the  whole 
sum  earned  by  the  roads  for  transporting  government  supplies, 
mails,  etc.,  should  be  applied  to  the  same  use.  Among  the 
various  changes  made  by  the  Act  of  1864  for  the  sake  of  mak¬ 
ing  easier  the  requirements  laid  on  the  roads  was  one  that  pro¬ 
vided  for  the  application  of  only  one-half  the  sums  earned  for 
government  transportation  to  the  debt  and  the  payment  by  the 
government  to  the  roads  of  the  other  half  in  cash. 

1  Statutes  at  Large,  56. 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


8  I 


The  Thurman  Act  dealt  with  both  these  provisions.  As  there 
had  arisen  disputes  over  what  constituted  net  earnings, —  which 
suits  had  been  decided  by  the  courts  against  the  contention  of  the 
government, —  net  earnings  were  defined  to  be  the  sum  which 
was  left  after  subtracting  from  the  gross  earnings  the  sums 
necessary  for  operating  the  road  and  keeping  it  in  repair,  and 
the  sum  paid  for  interest  on  the  first-mortgage  bonds. 

Next  it  was  provided  that  the  whole  of  the  compensation 
due  for  government  services  should  be  withheld  from  the  roads, 
half  of  it  being  applied  on  the  debt  to  the  government  and  half 
being  paid  into  a  sinking-fund.  The  sums  paid  into  this  sinking- 
fund  were  to  be  invested  by  the  Secretary  of  the  Treasury  in 
United  States  bonds,  preferably  those  bearing  5  per  cent, 
interest,  and  the  interest  was  to  be  reinvested  in  like  manner. 
Thus  the  sinking-fund  was  to  earn  compound  interest.1 

It  was  provided  that  other  sums  should  be  paid  into  the  sink¬ 
ing-fund  beside  those  for  services.  The  Union  Pacific  was 
required  to  pay  annually  $850,000,  or  so  much  thereof  as,  when 
added  to  the  half-sum  due  for  government  transportation  and  the 
5  per  cent,  of  net  earnings  required  by  the  Act  of  1862,  should 

1  Why  this  fund  should  be  invested  in  United  States  bonds,  instead  of  in  Union 
Pacific  first-mortgage  bonds  —  a  lien  prior  to  that  of  the  government,  —  it  is  hard  to 
say.  Such  investment  was  finally  permitted  by  an  Act  of  March  3,  1887  (24  Statutes 
at  Large,  488).  That  this  was  not  meant  for  a  concession  to  the  roads  is  very  evi¬ 
dent  from  the  tone  of  the  whole  law,  which  is  one  more  evidence,  among  many,  of  the 
continued  distrust  which  Congress  felt  toward  the  Pacific  railways. 

Section  5  of  this  law  said:  “That  whenever  it  shall  be  made  satisfactorily  to 
appear  to  the  Secretary  of  the  Treasury,  by  either  of  said  companies,  that 
seventy  five  per  centum  of  its  net  earnings  as  hereinbefore  defined,  for  any  cur¬ 
rent  year,  are  or  were  insufficient  to  pay  the  interest  for  such  year  upon  the  obliga¬ 
tions  of  such  company,  in  respect  of  which  obligations  there  may  exist  a  lien  para¬ 
mount  to  that  of  the  United  States,  and  that  such  interest  has  been  paid  out  of 
such  net  earnings,  said  Secretary  is  hereby  authorized,  and  it  is  made  his  duty,  to 
remit  for  such  current  year  so  much  of  the  25  per  centum  of  net  earnings  required 
to  be  paid  into  the  sinking-fund,  as  aforesaid,  as  may  have  been  thus  applied  and 
used  in  the  payment  of  interest  aforesaid.” 

It  is  not  quite  clear  what  Congress  meant  by  enacting  this  clause.  Earlier  in  the 
statute  it  was  provided  that  the  interest  on  the  first-mortgage  bonds  should  be  one  of 
the  deductions  from  gross  earnings  before  it  was  determined  what  were  the  net  earn¬ 
ings.  Thus  there  could  never  be  any  call  to  pay  this  interest  out  of  net  earnings. 


82 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


equal  25  per  cent,  of  the  whole  net  earnings.  That  is  to 
say,  the  Union  Pacific  would  pay  into  the  sinking-fund  in  a  very 
prosperous  year  (1)  one-half  the  sum  due  from  the  government 
for  services,  (2)  5  per  cent,  of  its  net  earnings,  and  (3) 

$850,000.  In  a  poor  year  it  would  pay  (1)  one-half  the  sum 
due  for  services  to  the  government,  a  moderately  constant  sum; 
(2)  5  percent,  of  a  smaller  amount  of  net  earnings;  and  (3)  a 
part  of  $850,000,  or,  if  (1)  equaled  20  per  cent,  of  the  net 
earnings,  none  of  it.  Thus  there  were  two  upper  limits  prescribed 
for  the  payments  into  the  sinking-fund. 

The  provision  for  payments  by  the  Central  Pacific  were  the 
same  except  that  the  sum  $850,000  was  increased  to  $1,200,000. 
The  remainder  of  the  Pacific  railways  were  omitted  from  the 
provisions  of  the  act. 

This  sinking-fund  was  to  be  applied  to  the  payment  of  the 
first-mortgage  bonds  at  their  maturity  and,  if  anything  remained 
thereafter,  to  the  liquidation  of  the  subordinate  liens. 

To  a  mind  untrained  in  legal  subtleties  it  would  seem  that 
the  Thurman  Act  was  an  encroachment  by  the  government  as 
sovereign  lawmaker  upon  the  rights  of  the  railway  company,  for 
the  sake  of  protecting  the  government  in  its  role  as  creditor.  It 
is  therefore  not  strange  that  the  railway  companies  refused  to 
accept  it  without  testing  its  constitutionality  in  the  courts.  The 
supreme  court,  in  the  natural  course  of  events,  passed  upon  the 
question  and  declared  the  Thurman  Act  to  be  constitutional. 

1  Sinking-Fund  Cases,  99  U.  S.  732. 

This  decision,  however,  was  given  by  the  vote  of  but  five  of  the  nine  members  of 
the  Court.  Justice  Hunt,  on  account  of  illness,  took  no  part  in  the  decision  ;  and 
Justices  Field,  Bradley  and  Strong  dissented  from  the  decision  of  the  Court. 

Justice  Bradley  in  his  dissenting  opinion  (99  U.  S.  744),  said  :  “That  it  is  a 
plain  and  flat  violation  of  the  contract  there  can  be  no  reasonable  doubt.” 

Justice  Strong,  in  his  dissenting  opinion,  said  :  “What,  then,  was  the  contract 
when  it  was  made  ?  The  government  lent  its  bonds,  and,  in  consideration  of 
the  loan,  each  company  assumed  five  obligations:  1st,  to  pay  the  bonds  at  their 
maturity,  that  is,  at  the  expiration  of  thirty  years  ;  2d,  to  keep  the  railroad  and  telegraph 
line  in  repair  and  use ;  3d,  to  furnish  transmission  of  dispatches  and  transportation 
for  the  government  at  reasonable  rates,  allowing  it  a  preference  for  such  purposes  ;  4th, 
to  apply  to  the  payment  of  the  bonds  and  interest  half  the  compensation  due  to  it  from 
the  government  for  services  rendered,  until  the  whole  amount  of  the  loan  is  fully  paid ; 


PUBLIC  OPINION,  LEGISLATION,  LITIGATION. 


83 


But  this  law,  even  if  constitutional,  is  open  to  criticism  on 
other  grounds :  in  its  practical  workings  it  has  been  a  marked 
failure.1  For  this  there  are  two  chief  reasons :  the  great  falling 
off  of  earnings,  due  to  increased  competition  for  western  traffic  ; 
and  the  failure  of  the  sinking-fund  to  earn  5  per  cent,  com¬ 
pound  interest.2  A  very  ordinary  degree  of  foresight  would  have 
predicted  the  former,  and  a  slight  knowledge  of  the  bond  market 
would  have  shown  that  the  latter  was  a  surety.  The  mistake  of 
Congress  in  1878  was  in  framing  the  Thurman  Act  without  regard 
to  the  future,  to  meet  conditions  which  were  already  passing  away. 

and,  5th,  after  the  completion  of  the  railroad,  to  apply  to  the  payment  of  the  bonds  at 
least  five  per  centum  annually  of  its  net  earnings.  The  lender  required  and  the 
borrower  undertook  nothing  more  (p.  732). 

“Now,  what  has  been  attempted  by  the  act  of  May  7,  1878  ?  The  act  was  passed 
with  sole  reference  to  this  contract,  and  all  its  provisions  have  in  view  the  imposition  of 
additional  obligations  upon  the  railroad  company.  It  does  not  purport  to  be  a  repeal 
of  the  charter.  Its  leading  purpose  is  to  take  control  of  the  property  of  the  debtor,  and 
sequester  it  for  the  security  of  a  debt  which,  by  the  terms  of  the  contract,  is  not  due 
and  payable  for  years  to  come  (p.  734). 

“Now,  where  is  the  power  of  Congress  to  add  new  terms  to  any  contract  made  with 
the  United  States,  or  made  between  any  two  private  individuals  ?  Where  is  the  power 
to  annul  vested  rights  ?  It  is  certainly  not  to  be  found  in  the  Constitution  (p.  736). 

“  ‘  Congress  may  at  any  time  alter,  amend,  or  repeal  this  act.’  The  power  thus 
reserved  is  one  over  the  act  itself,  not  over  anything  that  may  have  lawfully  been  done 
under  the  act,  before  its  repeal  or  alteration.  It  is  only  by  great  confusion  of  things 
essentially  distinct  that  this  power  can  be  construed  as  applicable  to  a  contract  made 
after  the  corporation  came  into  existence.  Besides,  the  act  of  1878  does  not  attempt 
to  repeal,  alter  or  amend  the  acts  of  1862  and  1864.  It  changes  no  franchise  granted 
by  those  acts,  nor  does  it  interfere  with  its  exercise.  It  interferes  only  with  the  fruits 
of  the  franchise.  The  right  to  possess  and  enjoy  the  income  of  the  company  is  not  a 
franchise.  It  is  an  incident  of  the  ownership  of  the  company’s  property,  though  the 
property  may  be  accumulated  by  the  use  of  the  franchise”  (p.  740). 

1  The  Thurman  Act  sinking-fund,  planned  to  grow  fast  enough  to  make  sure  of 
the  payment  at  maturity  of  the  whole  debt  to  the  government,  stood  thus  for  the  Union 
Pacific  Railroad  Company  at  the  designated  dates : 

December  31,  1890,  #11,105,492.53 

“  “  1891,  12,274,125.19 

“  “  1892,  13,714,541.50 

“  “  1893,  15,103,838.93 

Thus  the  average  annual  increase  for  these  years  is  #1,332,782.17,  while  the  annual 
interest  on  the  subsidy  bonds  is  #1,635,190.72. 

0 

3  The  United  States  5  per  cent,  bonds  were  at  such  a  premium  that  the  invest¬ 
ment  in  them  yielded  but  2  per  cent. — Pacific  Railway  Commission,  p.  989. 


84 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


In  1887  came  a  piece  of  congressional  legislation  which  was 
in  one  way  important.  Provision  was  made  for  the  appointment 
of  a  commission  of  three  who  should  investigate  fully  the  affairs 
of  the  bond-aided  railways.1  The  voluminous  testimony  taken 
by  this  commission  makes  it  possible,  by  the  expenditure  of  a 
sufficient  amount  of  energy,  to  get  a  thorough  understanding  of 
the  affairs  of  the  Pacific  railways.  The  commission,  with  its 
report,  handed  in  recommendations  as  to  legislation,2  but  it  did 
not,  as  seemed  to  be  hoped,  succeed  in  finding  a  basis  for  a  set¬ 
tlement  of  the  differences  between  the  roads  and  the  government 
which  would  commend  itself  to  Congress. 

Of  late  years  no  marked  changes  have  taken  place  in  the 
condition  of  public  opinion.  Each  session  of  Congress  sees  the 
introduction  of  measures  which  evince  the  same  old  vindictive 
feeling  toward  the  Pacific  railways,  but  which  bring  a  settlement 
of  the  debts  no  nearer. 

1  24  Statutes  at  Large,  488. 

3  Fiftieth  Congress,  first  session,  Executive  Document  No.  5/.  Nine  volumes. 


CHAPTER  VII. 


FINANCIAL  HISTORY  OF  THE  UNION  PACIFIC. 

In  this  chapter  it  is  proposed  to  make  a  study  of  the  financial 
history  of  the  Union  Pacific  system,  treating  chiefly  the  years 
since  1880.  This  inquiry  falls  naturally  into  two  parts:  first,  an 
examination  of  the  income  accounts  of  the  company  ;  and,  second, 
an  examination  of  the  uses  made  of  the  funds  collected.  The 
figures  concerning  the  income  will  show  how  the  road  has  treated 
the  communities  through  which  it  runs  and  to  serve  which  it  was 
built.  By  studying  the  distribution  of  those  funds  it  will  appear 
whether  or  not  the  men  whose  money  built  the  road  and  those 
who  later  became  holders  of  its  securities  were  justly  dealt  with. 

The  first  thing  to  be  considered  is  the  income  as  a  whole, 
and  its  division  between  operating  expenses  and  net  earnings. 
Chart1  I  presents  these  facts  for  the  Union  Pacific  Railroad  Com¬ 
pany,  whose  line  ran  from  Omaha  to  Ogden.  The  period  covered 
is  from  1870  to  1879  inclusive.  The  total  shaded  portion  rep¬ 
resents  gross  earnings  ;  the  lower  darker  portion  represents  oper- 

1  It  must  be  borne  in  mind  in  studying  the  charts  which  are  made  use  of  in  explain¬ 
ing  the  financial  history  of  the  enterprise  that  facts  of  various  and  widely  different 
sorts  are  thrown  together  on  the  same  page.  Some  of  these  facts  can  be  compared ; 
others  are  wholly  different,  and  no  basis  of  comparison  exists.  For  instance, 
areas  representing  gross  earnings,  operating  expenses,  and  net  earnings  can  be 
compared,  for  they  are  of  the  same  sort.  On  the  other  hand,  while  a  line  repre¬ 
sents  the  fluctuations  of  freight  rates,  and  a  line  represents  the  fluctuations  of 
passenger  rates,  and  while  both,  by  distance  above  the  base  line,  represent  the  amount 
charged  per  ton-mile  or  per  passenger-mile,  still  no  comparison  can  be  made  between 
them.  This  is  true  for  this  reason  :  The  units  made  use  of,  the  ton-mile  and  the  pas¬ 
senger-mile,  are  wholly  incomparable  things.  Yet  each  of  these  lines  is  valuable  as 
affording  a  basis  for  the  comparison  of  rates  of  one  sort  in  one  year  with  rates  of  the 
same  sort  in  another  year.  The  charts  will,  it  is  hoped,  if  too  much  is  not  expected  of 
them,  be  a  considerable  aid  to  an  understanding  of  the  facts  of  the  financial  history  of 
the  road. 


85 


86 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


ating  expenses  ;  leaving  the  upper,  lighter  portion  for  net  earn 
ings  —  that  portion  of  the  income  out  of  which  should  be  paid 
the  interest  on  the  bonded  indebtedness,  and,  if  this  leaves  any 
margin,  dividends  on  the  capital  stock. 

From  an  inspection  of  this  chart  it  will  be  seen  that  in  1870 
the  operating  expenses  consumed  61.34  per  cent,  of  the  gross 
earnings,  leaving  net  earnings  not  only  relatively,  but  absolutely 
smaller  than  for  any  subsequent  year  in  the  period.  In  1876, 
on  the  other  hand,  the  operating  expenses  were  but  40.88  per 
cent,  of  the  gross  earnings  —  the  lowest  per  cent,  reached  during 
the  period.  The  increase  in  gross  earnings  indicates,  unless  rates 
were  rising,  that  the  amount  of  business  done  was  steadily  increas¬ 
ing.  We  see,  however,  that  rates  during  this  period  not  only 
did  not  rise,  but  steadily  fell.  It  is  therefore  evident  that  the 
traffic  of  the  road  increased  even  faster  than  the  income  from  it. 
This  is  shown  also  by  the  lines  which  represent  the  changes  in 
the  amount  of  passenger  traffic  and  freight  traffic.  Comparing 
the  years  1870  and  1878,  we  find  that  while  the  money  receipts 
were  as  1  to  1.72,  the  numbers  of  passengers  carried  one  mile  were 
as  1  to  1.43,  and  the  numbers  of  ton-miles  of  freight  carried  were 
as  1  to  5. op.  Thus  it  appears  that  the  community,  as  years  went 
on,  received  a  greater  and  greater  service  from  the  road,  but  did 
not  pay  to  the  road  correspondingly  increasing  sums  of  money. 

It  is  also  noteworthy  from  this  chart  that  the  operating 
expenses  remained  almost  constant  during  the  years  before  1879. 
This  may  in  part  be  accounted  for  by  the  nature  of  the  industry. 
Since  a  railway  has  a  large  amount  of  capital  invested  in  road¬ 
bed  and  equipment,  upon  which  investment  it  must  pay  the  same 
interest  under  all  circumstances,  and  since  it  must  maintain  a 
working  force  and  pay  their  salaries  as  long  as  the  road  is 
operated,  whether  business  is  slack  or  brisk,  a  large  share  of  its 
expense  account  is  predetermined  and  independent  of  the 
amount  of  business  done.  This  is  a  characteristic  common  to 
all  industries  using  much  fixed  capital,  the  railway  being  the 
most  striking  exemplification  of  it. 

It  is  also  to  be  remembered  in  this  connection  that  very  few 


CHART  I. 


45 


40 


86 


30 


26 


20 


16 


10 


A 

6 


'■W///A 


wmm 


mm 


■Mi 


mm 


MS® 


mm 


mmm 


mm 


1870 


1871  1872  1873  1874  1875  1876  1877  1878  1879  ^ 


UNION  PACIFIC  RAILROAD 
COMPANY 

Net  Earnings 


Operating  Ex¬ 
penses 

Gross  Earnings  = 
total  shaded  area. 
(One  space  = 

$1,000,000) 

Freight  Traffic  A 


m 


Pas’enger  Traffic  g 
Figures  not  avail-  , 


I©- 


able 


1875  1876  1877  1878  1879 


CHART  II. 


/4w/A 


7  y////// 


(777777/ 


,v  w;vjv. 

>:*>:*>:  wXvX;  &£&& 


mwm 


1880  188!  1832  1883  1884  1885  1886  1887  1888  1889  1890  1891  1892  1893  1894 


UNION  PACIFIC  RAILWAY  COMPANY 

Gross  Earnings  =  total  shaded  portion. * 
Net  Earnings  i  \777Z& 


Operating  Expenses  1 
*One  space =$ i, 000,000. 


Freight  rates,  per  ton-mile  2  a* 


Passenger  rates,  per  pass-  _ 
enger-mile 2  *** 


Figures  not  available  |® - ®| 

20ne  space=$.ooi. 


1880  1881  1882  1883  1884  (885  1886  1887  1888  1889  1890  1891  1892  1893  1894 


FINANCIAL  HISTORY  OF  THE  UNION  PACIFIC. 


87 


railways  have  their  carrying  capacity  taxed  to  anything  like  the 
full  extent,  and  that  most  of  them  can  double  their  services  to 
the  community  with  only  a  slight  increase  of  expense  to  them¬ 
selves.  When  a  company  has  created  enough  railway  facilities 
to  meet  the  normal  requirements  of  a  community,  it  has  at  the 
same  time  created  the  facilities  for  a  traffic  many  times  as  large. 
For  instance,  all  the  traffic  between  Chicago  and  Kansas  City, 
which  is  now  divided  among  more  than  half  a  dozen  roads, 
could  be  carried  easily  by  one  road.  To  supply  local  facilities 
to  the  intervening  territory,  all  the  existing  roads  are  necessary  — 
perhaps  more  ;  yet  they  could  carry  tenfold  the  present  traffic 
and  not  be  overtaxed. 

However,  this  so  very  slight  increase  in  the  sums  spent  on 
operating  expenses  in  the  case  of  the  Union  Pacific  from  1870  to 
1878,  while  the  traffic  handled  made  such  a  marked  growth, 
raises  the  question  whether  this  class  of  expenditures  was  not 
kept  down  by  letting  the  physical  condition  of  the  road  decline. 
But  as  we  are  now  concerned  with  the  income  only,  and  as  to 
answer  this  question  would  require  an  analysis  of  the  expendi¬ 
tures  of  the  road,  its  consideration  may  be  postponed  for  the 
present. 

Turn  now  to  Chart  II,  which  represents  the  same  set  of  facts 
for  the  Union  Pacific  Railway  Company  for  the  years  from  1880 
to  1894.  It  will  be  remembered  that  this  company  was  formed 
in  1880  by  the  consolidation  of  the  Kansas  Pacific  and  the 
Denver  Pacific  with  the  original  Union  Pacific  Railroad  Com¬ 
pany,  the  aggregate  mileage  of  the  three  companies  being  1842 
miles  of  road. 

This  chart  shows  that  the  gross  earnings  were  in  1880  $22,- 
275,655.40,  that  they  reached  their  highest  point  in  1881,  fell 
lowest  in  1885,  and  were,  in  1894,  $14,739,436.76.  Thus  the 
course  of  gross  earnings  was,  during  these  fourteen  years, 
slightly  downward.  The  operating  expenses,  meanwhile,  rose 
slightly.  Thus  there  was  a  considerable  decrease  in  the  net 
earnings  of  the  road.  The  reason  for  this  is  made  evident  by  a 
glance  at  the  lines  which  represent  the  course  of  freight  and  pas- 


88 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


senger  rates,  the  fall  being  very  marked  in  each.  Passenger 
rates  fell  from  3.34  cents  per  mile  in  1881  to  1.865  cents  per 
mile  in  1894,  a  decrease  of  45  per  cent,  from  the  standard  of 
1881  ;  while  freight  rates  dropped  from  1.98  cents  in  1881  to 
.984  cents  in  1894,  a  decrease  of  51  per  cent.  This  difference 
of  6  per  cent,  in  the  rates  of  decrease  does  not,  as  will  soon  be 
shown,  adequately  indicate  the  greater  importance  of  the  fall  in 
freight  rates. 

The  increase  in  operating  expenses,  which  is  quite  marked  for 
the  period  beginning  with  1884,  probably  indicates  that  a  better 
quality  of  service  was  rendered  as  years  went  on. 

To  sum  up  the  facts  shown  by  Chart  II :  During  this  period 
the  amount  of  services  to  the  community  was  increased ;  the 
quality  of  service  was  probably  raised  ;  this  service  was  given 
for  lower  rates.  While  the  community  gained  in  all  these  par¬ 
ticulars  the  company  was  steadily  surrendering  its  prosperity. 
And  when  it  is  said  that  the  company  lost,  it  is  worth  while  to 
consider  who  is  meant.  The  company  is  not  a  small  circle  of 
officers  who  conduct  the  affairs  of  a  business  concern  whose 
visible  body  is  a  network  of  iron  rails.  It  is  not  merely  a  soul¬ 
less  corporation.  The  Union  Pacific  Railway  Company  is  rather 
a  widely  scattered  body  of  investors,  living  largely  in  the  East, 
whose  money,  invested  in  a  certain  railway  property,  vastly 
increases  the  productiveness  of  a  certain  section  of  the  West. 

What  Chart  II  did  for  the  Union  Pacific  Railway  Company , 
Chart  III  does  for  the  Union  Pacific  Railway  system , — by  which 
is  meant  the  Company,  together  with  all  the  branch  lines  and 
feeders  in  which  the  Company  is  interested. 

The  facts  which  drew  attention  in  the  preceding  chart  are 
here  still  more  striking.  In  this  one,  another  line  has  been  added 
to  show  the  increase  in  mileage.  By  this  it  appears  that  the 
mileage  of  1880,  2766.30  miles,  steadily  grew  to  7690.57  miles  in 
1893.  Roughly  following  this  increase  in  mileage  is  the  increase 
in  gross  earnings.  Together  with  this  increase  in  gross  earn¬ 
ings  must  be  considered  the  fall  of  passenger  and  freight  rates, 
as  striking  in  the  case  of  the  system  as  a  whole  as  it  was  with  the 


CHART  III. 


1880  1881  1882  1883  1884  1885  1886  1887  1888  1889  1890  1891  1892  1893  .. 

46| - - - - - - - - - - - - - 1 40 


1880  1881  1882  1883  1884  1885  1886  1887  1888  1889  1890  1891  1892  1893 


Owing  to  complications  brought  about  by  the  Receivership,  it  was  found  impossi¬ 
ble  to  include  in  the  statements  covering  the  financial  operations  of  the  Union  Pacific 
Railway  System  the  figures  relating  to  certain  lines  which  had  previously  appeared  as  a 
part  of  the  system.  Since  this  change  in  the  basis  of  the  accounts  destroys  their  value 
for  comparison  with  the  figures  of  previous  years,  no  account  of  the  year  1894  is  taken 
in  the  charts  and  tables  relating  to  the  Union  Pacific  Railway  System.  They  are  easily 
accessible  in  the  annual  report  of  the  company  to  any  one  wishing  to  examine  them. 

The  roads  omitted  from  the  accounts  of  1894  are  the  Oregon  Short  Line  &  Utah 
Northern  Railway  Co.;  the  Union  Pacific,  Denver  &  Gulf  Railway  Co.;  the  Union 
Pacific,  Lincoln  &  Colorado  Railway  Co.;  the  St.  Joseph  &  Grand  Island  Railroad 
Co.;  and  the  Kansas  City  &  Omaha  Railroad  Co. 


CHART  IV, 


» 


CHART  V 


FINANCIAL  HISTORY  OF  THE  UNION  PACIFIC. 


89 


nucleus  of  the  system,  the  railway.  So  again  we  see  that  the 
traffic  done  for  the  community  increased  faster  than  the  remu¬ 
neration  for  it.  A  very  noticeable  feature  of  this  chart  is  the  rapid 
rise  in  operating  expenses,  due  to  the  unsatisfactory  nature  of 
some  of  the  branch  lines.1  .  This  kept  net  earnings  stationary 
throughout  the  period. 

Again  we  find  all  the  changes  for  the  benefit  of  the  commu¬ 
nity,  and  all  at  the  expense  of  the  road. 

The  income,  which  has  thus  far  been  taken  as  a  whole,  should 
now  be  separated  into  its  component  parts,  in  order  to  show  the 
relative  importance  of  the  very  various  sums  which  make  it  up. 
For  this  purpose  Charts  IV  and  V  have  been  constructed. 

It  will  be  noticed  at  once  that  Charts  II,  and  IV  and  Charts 
III  and  V  are  identical  in  outline,  the  former  two  dealing  with  the 
gross  earnings  of  the  Union  Pacific  Railway  Company ,  and  the  latter 
two  with  the  gross  earnings  of  the  Union  Pacific  Railway  system. 

This  difference  is  to  be  noted  between  the  first  three  charts, 
and  Charts  IV  and  V.  In  the  first  set  both  gross  earnings  and 
operating  expenses  began  at  the  base  line.  Here  the  areas  are 
mutually  exclusive.  The  lower  one  represents  earnings  from 
freight,  the  next  earnings  from  passenger  traffic,  and  above  are 
three  small  areas  representing  earnings  from  mail,  express,  and 
miscellaneous  sources. 

Both  Chart  IV  and  Chart  V  show  the  very  great  preponder¬ 
ance  of  one  item  —  freight  earnings  ;  that  the  passenger  traffic  is 
of  very  secondary  importance ;  and  that  the  income  from  mail, 
express,  and  miscellaneous  sources  is  insignificant.  It  is  indi¬ 
cated  by  the  facts  presented  in  these  charts,  and  the  opinion  is 
confirmed  by  a  further  study  of  the  question,  that  a  western  rail¬ 
way,  if  circumstances  permitted  it  to  do  so,  would  be  better  off  if 
it  did  no  business  but  handling  freight.  Passenger  rate  wars  are 
noticed  by  far  more  people  than  are  freight  rate  wars,  but  from 
these  charts  it  appears  that  the  Pacific  railways  can  afford  to 
amuse  themselves  and  the  community  by  cutting  passenger  rates, 
while  to  cut  freight  rates  is  a  decidedly  serious  matter. 

1  Alluded  to  where  the  theory  of  branches  was  discussed,  page  66  above. 


90 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


In  studying  the  succeeding  charts  the  relative  importance  of 
the  items  shown  in  Charts  IV  and  V  must  constantly  be  borne 
in  mind,  else  a  false  impression  will  be  gained,  for  it  has  not 
seemed  practicable  to  represent  in  all  of  them  the  same  sum  of 
money  by  the  same  area. 

Next  let  us  consider  separately  several  of  the  sources  of 
income,  beginning  with  freight,  it  being  by  far  the  most  impor¬ 
tant.  For  the  Railway  Chart  VI  shows,  by  the  shaded  portion, 
the  steady  and  considerable  increase  in  tonnage  carried ;  the 
rates,  falling  rapidly  until  1884  and  less  rapidly  thereafter;  the 
consequent  marked  decrease  in  money  receipts  to  1884,  and 
thereafter  the  almost  imperceptible  recovery,  ending  with  a  fall¬ 
ing  off  in  1894  of  33  per  cent,  from  the  figures  of  1892. 

Chart  VII,  representing  the  freight  traffic  for  the  system, 
shows  a  more  rapid  increase  in  tonnage  than  was  shown  for  the 
railway.  The  rates,  changing  more  steadily,  fell  off  about  as 
much  for  the  system  as  for  the  railway.  The  course  of  money 
receipts  was,  owing  to  the  great  increase  in  tonnage  carried, 
decidedly  upward,  although  much  less  so  than  the  course  of  the 
tonnage. 

Charts  VIII  and  IX,  exhibiting  the  passenger  business  for 
the  railway  and  the  system  respectively,  show  facts  in  keeping 
with  what  was  seen  in  regard  to  the  freight  business.  In  both 
cases  rates  fell ;  as  a  result,  the  increased  traffic  of  the  railway 
was  done  for  a  sum  absolutely  less  as  years  went  on  ;  while  for 
the  system  the  very  greatly  increased  traffic  was  done  for  a  sum 
relatively  less  at  the  end  than  at  the  beginning  of  the  period. 

It  will  be  remembered  from  Charts  IV  and  V  that  mail  and 
express  business  brought  small  and  regular  amounts  into  the 
treasury.  As  nothing  would  be  gained  by  a  further  elaboration 
of  these  facts  they  may  be  passed  over.  But  the  third  of  the 
small  spaces  shown  in  those  charts,  the  income  from  miscella¬ 
neous  sources,  includes  two  items  which  are  interesting,  although 
far  from  important  from  a  financial  point  of  view.  These  are  the 
income  from  the  land  grants  of  the  Union  Pacific  Railroad  and  the 
Kansas  Pacific,  and  from  the  coal  mines  owned  by  the  former 


CHART  VI. 


CHART  VII 


CHART  VTTI 


CHART  TXT, 


FINANCIAL  HISTORY  OF  THE  UNION  PACIFIC. 


91 


road.  So  much  has  been  said  about  the  reckless  munificence  of 
the  government  in  bestowing  the  land  grants,  and  so  many  attacks 
have  been  made  on  the  Union  Pacific  Railroad  Company  for  its 
extortions  practiced  through  the  coal  trade,  that  it  is  worth  while  to 
get  at  the  facts  as  to  the  true  value  of  these  possessions  to  the  roads. 

Charts  X  and  XI  present  the  available  facts  of  the  history 
of  the  land  grants  which  were  given  to  the  original  Union  Pacific 
and  to  the  Kansas  Pacific.  On  the  former  it  will  be  noted  that 
the  highest  price  was  paid  in  1877  and  that  the  price  dropped 
with  marvelous  rapidity  after  1881  to  its  lowest  point  in  1886  — 
thus  following  the  price  of  wheat.  In  1887  began  a  rally  which 
in  1 888  carried  the  price  almost  to  its  former  level  —  the  effect  of 
the  boom  of  1887.  Then  came  a  fall  almost  to  the  old  lowest 
level,  with  a  subsequent  partial  recovery.  For  three  years,  1889, 
1892  and  1894,  the  Union  Pacific  land  department  was  run  at  a 
not  inconsiderable  loss. 

The  price  of  the  lands  of  the  Kansas  Pacific  ranged  higher 
than  those  of  the  Union  Pacific,  its  grant  lying  farther  east  and 
south.  The  fluctuations  in  price,  moreover,  were  far  less  violent, 
and  the  tendency  was  decidedly  upward.  For  1892,  1893  and 
1894  however,  there  was  a  deficit. 

But  the  transactions  of  the  land  department  were  never  impor¬ 
tant.  For  only  three  years  on  the  Union  Pacific  and  for  four  on 
the  Kansas  Pacific  did  the  net  proceeds  from  land  sales  reach  the 
million-dollar  point. 

Still  less  important  was  the  coal  business  of  the  Union  Pacific 
Railroad  Company,  shown  by  Chart  XII.  The  number  of  tons 
mined  rose  steadily ;  the  cost  tended  unsteadily  downward  ;  the 
price,  for  the  later  years  when  it  can  be  ascertained,  tended 
downward  at  about  the  same  rate  as  the  cost,  but  with  less  violent 
fluctuations.  The  proximity  of  the  lines  representing  price  and 
cost  show  that  the  profit  per  ton  has  never  been  large,  and  the 
crossing  of  the  lines  in  three  places  shows  that  for  three  years 
the  coal  properties  were  conducted  at  an  actual  loss.  This  is 
also  shown  by  the  sinking  below  the  base  line  of  the  line  which 
bounds  the  net  earnings  of  the  department. 


92  HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 

The  preceding  discussion  has  pointed  out  the  advantages 
which  have  come  to  the  states  in  which  the  Union  Pacific  system 
ramifies,  through  the  increase  in  mileage,  the  fall  in  both  passen¬ 
ger  and  freight  rates,  and  the  betterment  of  the  service  rendered. 
Let  it  not  be  understood  that  these  things  are  represented  as 
due  to  the  generosity  of  the  management,  or  even  to  the  far¬ 
sighted  selfishness  which  prompts  the  railway  manager  to  lower 
rates  so  as  to  increase  traffic.  All  of  them  have  come  about  in 
the  course  of  a  struggle  against  strong  competitors  for  a  living 
traffic.  What  has  happened  to  the  Union  Pacific  has  happened 
to  dozens  of  other  roads.  The  difference  has  been  that,  under 
its  peculiar  handicaps,  this  competition  has,  in  the  case  of  the 
Union  Pacific,  forced  matters  over  the  danger  line,  and  a  bad 
season  has  put  the  road  into  the  hands  of  receivers.  Other 
roads,  struggling  in  the  same  mire  of  unrestricted  competition, 
have  been  less  unfortunate  and  have  escaped  with  the  cutting 
down  or  the  annihilation  of  dividends.  A  comparison  of  the 
expense  ratios  of  the  Union  Pacific  and  its  competitors  shows 
that  all  the  trans-Missouri  roads  are  in  the  same  class  and  all 
run  on  the  same  principles.  But  on  account  of  its  peculiar 
relations  to  the  government  the  affairs  of  the  Union  Pacific  have 
attracted  much  more  than  their  just  share  of  public  attention. 

With  this  study  of  the  income  of  the  Union  Pacific,  we  come 
to  the  questions  of  expenditure.  Have  the  funds  of  the  Com¬ 
pany  been  wisely  and  honestly  expended  ?  This  is  a  question 
which  it  is  far  from  easy  for  an  outsider  to  answer.  A  study  of 
the  sums  expended  year  after  year,1  shows,  neither  in  their  totals 
nor  in  their  component  parts,  any  fluctuations  violent  enough  to 
arouse  suspicion.  Changes  in  management  do  not  seem  to  have 
resulted  in  radical  changes  in  policy,  so  we  may  perhaps  infer 
that  there  were  no  glaring  faults  to  be  corrected. 

A  comparison  of  the  expense  ratios  of  the  Union  Pacific  and 
other  roads  in  the  same  region  reveals  nothing  of  moment ;  the 
differences  are  not  wide  enough  to  be  significant.  It  might  be 

1  See  tables  facing  p.  124,  Appendix. 


CHART  X 


1874  1875  1876  1877  1878  1879  1880  1881  1882  1883  1884  1885  1886  1837  1888  1889  1890  1891  1892  1893  1894 


UNION  PACIFIC  RAILROAD 
COMPANY 

Total  Proceeds  1! 

(one  space  =$150,000)  j| 

Expenses  . 

rone  snare  =$1  co. non  1  1 

I 

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1874  1875  1876  1877  1878  I87S  1880  1881  1882  1883  1884  1885  1886  1887  1888  1889  1890  1891  1892  1893  1894 


I 


{ 


CHART  XX. 


1IX.  IHVHO 


. 


FINANCIAL  HISTORY  OF  THE  UNION  PACIFIC. 


93 


possible  to  learn  something  by  a  more  minute  comparison  of  the 
accounts  of  the  Union  Pacific  and  its  competitors,  if  railway 
accounting  had  been  reduced  to  a  science.  But  each  road  has 
developed  its  own  system  of  bookkeeping,  no  two  systems  are 
alike,  no  two  roads  distribute  the  items  of  expenditure  among 
the  various  heads  in  the  same  way,  and  hence  no  comparison  is 
possible.1 

Bearing  in  mind,  then,  that  only  an  expert  accountant,  with 
the  greatest  facilities  for  investigating  and  unlimited  time,  could 
say  positively  that  the  figures  presented  to  the  public  by  the 
Union  Pacific  Company  have  or  have  not  been  made  to  hide 
fraud,  it  is  safe  to  say  this  at  least :  The  funds  of  the  Union 
Pacific  seem  to  have  been  spent  properly. 

A  study  of  the  fluctuations  of  the  funded  debt  of  the  sys¬ 
tem  is  still  more  remotely  indicative  of  the  real  state  of  affairs, 
but  does  not  alter  the  conclusion  already  reached.  The  growing 
debt  can  be  explained  only  by  the  expansion  in  mileage,  and 
that  expansion  we  have  already  commended.  But  the  commen¬ 
dation  was  given  on  the  supposition  that  the  expense  was  to  be 
borne  out  of  profits  which  might  otherwise  have  gone  to  divi¬ 
dends.  Whether  expansion  would  be  wise  when  it  necessitated 
the  issue  of  new  bonds  is  another  matter,  and  the  fate  of  the 
Atchison  system  is  a  striking  argument  against  it.  But  what 
evidence  can  be  gotten  at  does  not  point  to  any  very  radical 
faults  in  the  line  of  expansion.  If  anything  in  the  case  of  the 
Union  Pacific  is  legitimate  ground  for  complaint,  it  is  the  manip¬ 
ulation  of  the  price  of  its  securities.  That,  however,  is  not  a 
matter  of  railway  management,  but  of  Wall  Street  speculation. 

1  This  unsatisfactory  state  of  affairs,  however,  is  disappearing  under  the  influence 
of  the  Interstate  Commerce  Commission. 


CHAPTER  VIII. 


PROPOSALS  FOR  SETTLEMENT  AND  PRESENT  STATUS. 

The  government  of  the  United  States,  as  creditor  of  the 
Pacific  railways,  is  constantly  liable  to  be  drawn  into  disputes 
which  involve  it,  the  sovereign,  in  contests  before  its  own  courts 
with  its  creatures,  the  railway  companies.  The  government,  as 
supreme  lawmaker,  is  also  constantly  tempted  to  alter  its  sta¬ 
tus  as  one  of  the  parties  to  a  contract,  by  altering  the  laws 
which  govern  the  railways  —  as  it  certainly  seems  to  have  done 
in  the  case  of  the  Thurman  Act.  The  undesirable  features  of 
such  a  case,  an  attempt  to  mix  politics  and  business,  are  too  evi¬ 
dent  to  need  enumeration.  They  have  from  the  beginning 
impressed  every  student  of  the  situation,  and  particularly  the 
men  who  have  been  obliged  to  conduct  the  business  affairs  of 
the  roads  under  these  untoward  influences.  In  consequence,  the 
owners  of  the  properties  have,  at  various  times,  offered  to  pro¬ 
vide  for  the  payment  of  the  debts  before  their  maturity,  if  they 
could  by  so  doing  be  freed  from  all  connection  with  the  govern¬ 
ment.  As  several  of  these  offers  were  eminently  fair  and  made 
by  men  who  could  have  executed  them  without  difficulty,  it  is 
at  first  surprising  that  they  were  not  accepted.  But  the  diffi¬ 
culty  is  always  present  that  no  one  man  or  small  body  of  men 
can  negotiate  in  behalf  of  the  government  and  bind  it  to  a  bar¬ 
gain.  There  is  required  the  concurrent  action  of  both  houses  of 
Congress  and  the  President,  and  to  get  such  action  requires  an 
amount  of  agitation  the  energy  for  which  no  one  has  as  yet  been 
able  to  spare.  Consequently,  with  the  first  of  the  subsidy  bonds 
already  due,  the  Pacific  railway  problem  is  still  unsolved. 

Soon  after  Gould  took  hold  of  the  Union  Pacific  and  before 
he  had  begun  to  buy  Kansas  Pacific,  he  and  General  G.  M. 

94 


PROPOSALS  FOR  SETTLEMENT  AND  PRESENT  STATUS.  95 


Dodge  formulated  two  plans  for  the  settlement  of  the  govern¬ 
ment  claims  on  the  Union  Pacific.  These  plans,  made  before  the 
dividend-paying  period  began,  were  based  on  the  earning  capac¬ 
ity  which  the  road  had  thus  far  been  able  to  develop ;  they 
contemplated  nothing  more  than  the  payment  of  the  debt  within 
twenty  years  of  its  maturity.  There  was  then  almost  as  much' 
doubt  of  the  possibility  of  performing  this  feat  as  there  is  now, 
but  that  is  not  what  defeated  the  plans.  It  was  the  baneful 
influence- of  Wall  Street  which  induced  the  government  officials 
to  reject  the  offers.1 

February  io,  1875,  Mr.  Dillon,  president  of  the  Union 
Pacific,  submitted  to  the  Secretary  of  the  Treasury  an  offer  to 
pay  $500,000  per  year  for  twenty  years,  and  thereafter  $750,000 
per  year,  these  sums  to  be  put  into  a  sinking-fund,  and  the  6  per 
cent,  interest  thereon  to  be  compounded  semi-annually  until  the 
whole  amount  accumulated  equaled  the  whole  of  the  debt  to 
the  government.2  Again  the  government  let  an  opportunity 
for  a  settlement  slip  through  its  fingers'. 

The  dispatches  from  Washington  of  February  18,  1875,  con- 

1  General  Grenville  M.  Dodge  :  When  Mr.  Gould  came  into  the  road  he  com¬ 
menced  giving  it  [the  payment  of  the  debt  to  the  government]  a  good  deal  of  con¬ 
sideration,  and  we  formulated  a  plan  —  two  plans;  it  is  impossible  for  me  to  state 
exactly  what  they  were,  but  I  can  give  the  substance.  One  was  a  plan  in  which  we 
calculated  the  present  value  of  the  debt  and  agreed  to  make  a  payment  that  would 
pay  that  debt  off  in  a  certain  length  of  time.  Another  plan  was  one  by  which  we 
agreed  to  pay  so  much  per  year  that  should  be  made  a  sinking-fund,  and  increase 
upon  the  gross  earnings.  I  went  to  Washington  with  the  propositions,  and  went 
before  the  Secretary  of  the  Treasury,  Mr.  Bristow,  and  called  his  attention  to  it ;  I  got 
him  to  consider  it ;  he  took  it  up  and  made  some  changes  in  it ;  it  was  then  taken 
before  the  Cabinet;  it  was  approved;  I  went  with  it  before  the  President,  General 
Grant,  and  he  approved  it ;  and  they  wrote  their  messages,  and  were  about  to  present 
them  to  Congress,  when  it  commenced  getting  into  the  papers.  There  was  an 
immense  short  interest  in  Union  Pacific  stock,  and  they  sent  representatives  to  Wash¬ 
ington  who  went  to  General  Grant  and  made  him  believe  that  this  proposition  of  the 
company  was  for  the  purpose  of  booming  the  stock,  and  that  laid  the  plan  by.  Gen¬ 
eral  Grant  has  told  me  a  great  many  times  since  that  he  regretted  very  much  that  he 
did  not  put  the  matter  before  Congress  and  settle  the  thing  then.  The  proposition 
that  we  made  then  would,  I  think,  have  paid  the  debt  off  within  twenty  years  after  it 
was  due.” — Pacific  Railway  Commission ,  p.  3815-6. 

2  Commercial  and  Financial  Chronicle,  February  13,  1875. 


96 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


tain  a  letter  of  Vice-President  C.  P.  Huntington  of  the  Central 
Pacific,  offering  to  pay  semi-annually  $200,000,  interest  to  be 
compounded  as  in  the  Union  Pacific  offer,  these  payments  to  be 
continued  until  the  government  claim  was  met.1  This  offer  was 
embodied  in  a  bill  and  presented  by  Senator  Edmunds,2  but 
shared  the  same  fate  as  the  preceding  one. 

Again,  while  the  Thurman  Act  was  pending,  Jay  Gould 
offered  to  pay  in  cash  the  present  worth  of  the  whole  subsidy 
debt  of  the  Union  Pacific.3  The  answer  of  the  government  was 
the  passage  of  the  Thurman  Act. 

Charles  Francis  Adams,  in  1887,  voicing  the  opinions  of  the 
stockholders  of  the  Union  Pacific,  approved  such  a  plan  as  Gould 
had  formulated,  and  said  that  a  basis  for  settlement  would  soon 
be  found  if  an  offer  was  made  to  set  the  road  free  from  govern¬ 
ment  interference.4 

Various  other  expressions  of  like  purport  have  been  made  from 
time  to  time,  but  in  less  definite  form,  so  they  need  not  be  enu¬ 
merated.  But  enough  has  been  said  to  indicate  the  constant 
hope  on  the  part  of  the  railway  that  the  hampering  partnership 
with  the  government  might  be  dissolved. 

Proposals  for  altering  the  relations  between  the  Pacific  rail¬ 
ways  and  the  government  have  come  more  frequently  from  the 
government  than  from  the  roads.  These  proposals  have  been 
so  numerous  that  it  is  not  worth  while  to  detail  them  individu¬ 
ally,  and  as  they  fall  into  two  classes  this  is  unnecessary.  Of  the 
first  class,  those  depending  on  a  sinking-fund  for  the  payment 
of  the  debt,  the  Thurman  Act  may  serve  as  a  type.  As  this 
law  has  received  sufficient  consideration,  we  may  pass  to  the 
second  class. 

This  class,  where  a  refunding  of  the  debt  is  provided  for, 
may  be  represented  by  the  Hoar  Bill,  introduced  into  the  Sen¬ 
ate  January  21,  1885.  This  provided  that  the  present  worth  of 

1  Commercial  and  Finaticial  Chronicle ,  February  20,  1875. 

2  Forty-fourth  Congress,  first  session,  vol.  iv,  p.  2149. 

3  Pacific  Railway  Commission,  p.  510-1. 

4  Ibid.,  p.  991-6. 


PROPOSALS  FOR  SETTLEMENT  AND  PRESENT  STATUS.  9 7 

the  debt  should  be  calculated  ;  that  120  bonds  equal  in  amount 
and  aggregating  the  present  worth  of  the  debt  should  be  drawn 
up ;  that  these  bonds,  bearing  3  per  cent,  interest,  should  fall 
due  at  half-yearly  periods  ;  that  the  security  given  under  the 
Acts  of  1862  and  1864  for  the  payment  of  the  subsidy  bonds 
should  be  the  security  for  the  payment  of  these  new  bonds  by 
which  the  old  were  replaced  ;  that  default  on  the  payment  of 
any  one  of  these  bonds  for  six  months  after  its  maturity  should 
be  ground  for  foreclosure.1  Congress  was  not  yet  ready  to 
adopt  such  a  plan  for  settlement,  so  the  proposal  came  to 
naught. 

In  April  1894,  Attorney-General  Olney  formulated  a  plan 
for  dealing  with  the  debt  of  the  Union  Pacific  which  combines 
some  of  the  features  of  both  the  classes  mentioned  above.  It 
provides  for  (1)  the  retention  of  the  Union  Pacific  organization, 
and  (2)  a  refunding  of  the  debt.  The  details  of  this  latter  fea¬ 
ture  of  the  scheme  are  these  :  The  present  value  of  the  debt 
(July  1,  1894)  is  to  be  ascertained,  and  bonds  of  the  Union 
Pacific  Railway  Company  received  for  that  sum.  These  bonds 
are  to  bear  2  per  cent,  interest  and  to  run  100  years.  They  are 
to  constitute  a  second  mortgage  on  the  whole  property  of  the 
Union  Pacific  system  —  bond-aided  portions  and  branches,  real, 
personal  and  mixed  property.  Beginning  with  1905,  $1,650,000 
annually  is  to  be  paid  into  a  sinking-fund,  and  default  for  six 
months  is  to  be  cause  for  foreclosure.  The  first-mortgage  bonds 
are  also  to  be  refunded  at  a  lower  rate  of  interest.  (3)  A  third 
mortgage  is  also  allowed,  for  the  purpose  of  keeping  up  the 
physical  condition  of  the  property  and  meeting  such  emergencies 
as  may  arise.  The  issue  of  this  mortgage  is  limited  by  the  pro¬ 
vision  that  fixed  charges  must  never  rise  above  $8,500,000, 
which  is  $4,000,000  or  $5,000,000  less  than  they  now  are. 

Later  in  the  session  this  plan  was  somewhat  changed  by  its 
author,  and  finally  rejected.  This  result  was  largely  due  to  the 
efforts  of  the  California  members,  whose  bitterness  against  the 
Southern  Pacific  Company  seemed  to  be  the  chief  motive. 

1  Forty-eighth  Congress,  second  session,  p.  1074. 


98 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


The  reorganization  committee  of  the  bondholders,  with 
Senator  Brice  as  chairman,  having  failed  to  get  the  legislation 
which  was  needed,  returned  the  bonds  which  had  been  deposited 
with  them,  and  abandoned  their  task. 

What  is  the  present  status  of  the  Union  Pacific  ?  and  what  are 
the  stumbling-blocks  in  the  way  to  a  settlement  between  the 
company  and  the  government  ?  As  we  have  already  said,1  the 
road  is  in  the  hands  of  receivers,2  and  foreclosure  suits  are  pend¬ 
ing  which  affect  almost  the  whole  mileage  of  the  system.  Its 
indebtedness  is  as  follows  : 

Bonds  Outstanding  Uni^Pa^fic 

Union  Pacific  and  Kansas  Pacific .  $78,469,785.00  $2,578,000.00 

United  States  Bonds  issued  to  Union  Pacific 

and  Kansas  Pacific .  33,539,512.00 

Interest  on  United  States  Bonds,  balance  of 

account .  18,193,197.97 

Total  Union  Pacific  Railway .  $130,202,494.97 

Operated  Roads,  total .  140,494,772.04  32,815,500,00 


Total  Owned  and  Operated  Roads.  . .  $270,697,267.01  $35,393,500.00 


Owned  by  other 
Companies  in 
the  System 

Union  Pacific  and  Kansas  Pacific . 

United  States  Bonds  issued  to  Union  Pacific 

and  Kansas  Pacific . 

Interest  on  United  States  bonds,  balance  of 
account  . 


Afloat 

$75,891,785.00 

33.539.512.00 

18,193,197.97 


Total  Union  Pacific  Railway .  $127,624,494.97 

Operated  Roads,  total .  $12,149,180.00  95,530,092.04 


Total  Owned  and  Operated  Roads.  . .  $12,149,180.00  $223,154,587.01 

The  problem  is,  then,  how  to  reorganize  a  railway  system 
with  such  earning  capacity  as  was  shown  in  the  preceding 

1  Page  67,  above. 

’Appointed  October  13,  1893,  on  an  application  signed  by  the  executors  of  the 
will  of  Frederick  L.  Ames.  The  receivers  named  were  S.  H.  H.  Clark,  President  of 
the  road ;  Oliver  W.  Mink.  Controller  of  the  road,  and  E.  Ellery  Anderson,  one  of  the 
government  directors.  At  a  later  date  J.  W.  Doane  and  Frederick  R.  Coudert  were 
added,  representing  the  government  interest  and  securing  to  the  government  a  majority 
of  the  receivers. 


PROPOSALS  FOR  SETTLEMENT  AND  PRESENT  STATUS.  99 


chapter ;  over-capitalized,  and  burdened  with  an  enormous  weight 
of  interest  charges  ;  with  a  history  highly  peculiar,  which,  being 
but  poorly  understood,  has  induced  a  strong  prejudice  against  the 
road.  This  last  feature  ought  not  to  figure  in  the  case  in  the 
slightest  degree  —  the  reorganization  should  be  purely  a  business 
affair, —  but  any  one  who  has  followed  the  action  of  Congress 
concerning  the  Pacific  railways  in  the  past  will  be  sure  that  this 
element  will  enter.  It  is  certain,  however,  that  the  more  fully 
the  history  of  the  road  is  understood,  the  more  will  this  prejudice 
sink  into  the  background. 

What,  then,  ought  to  be  the  lines  upon  which  a  plan  of 
reorganization  should  be  constructed  ? 

First  of  all,  any  agreement  for  a  settlement  should  be 
negotiated  with  the  intention  of  separating  the  railway  from  the 
government  —  setting  it  free  from  all  governmental  interference, 
making  it  impossible  to  manipulate  the  stock  market  by  means 
of  congressional  agitation.  The  introduction  of  a  bill  or  a 
resolution  attacking  the  Pacific  railways  is  sure  to  make  itself 
felt  on  the  stock  exchange.  The  importance  of  this  is  evident 
when  we  consider  that  a  change  of  one  point  varies  the  value  of 
the  Union  Pacific  stock  over  $360,000,  and  congressional  action 
has  in  one  month  sent  the  stock  down  nearly  20  points.  This 
evil  is  the  first  to  be  gotten  rid  of.  The  government  must  take 
the  same  position  as  any  other  creditor. 

Second ;  the  offer  made  by  the  government  must  be  such  as 
to  appeal  to  the  self-interest  of  the  road.  The  time  for  paying 
the  debt  must  be  extended  and  the  rate  of  interest  must  be 
lowered.  Since  the  debt  cannot  be  paid  at  maturity,  concessions 
must  be  made  by  the  government  as  a  basis  for  demanding  others 
from  the  road. 

Third ;  the  road  must,  in  return  for  the  extension  of  time  and 
the  lowering  of  interest,  give  the  government  a  better  security 
than  it  now  has.  At  present  the  lien  of  the  government  lies  only 
on  the  bond-aided  portions  of  the  system  —  not  on  the  Union 
Pacific  terminals,  nor  on  the  Kansas  Pacific  terminals  ;  on  only  a 
part  of  the  line  of  the  Kansas  Pacific ;  on  no  part  of  the  Denver 


100 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Pacific;  on  none  of  the  branch  lines.  The  road  must  be  induced 
to  secure  the  debt  by  putting  a  blanket  mortgage  on  the  whole 
system.  This  it  was  willing  to  do  some  years  ago,  whether  it  is 
so  now  or  not. 

Fourth  ;  the  provision  for  the  payment  to  the  government  of 
a  percentage  of  net  earnings  must  be  abolished.  This  neces¬ 
sitates  governmental  inspection  and  interference,  and  induces 
disputes.  The  payments  must  be  predetermined  amounts,  so 
that  the  company  can  forecast  the  demands  to  be  made  upon  it. 


APPENDIX  I. 


ACTS  CHARTERING  THE  UNION  PACIFIC  RAILWAY. 

An  Act  to  aid  in  the  construction  of  a  Railroad  and  Telegraph 
Line  from  the  Mississippi  River  to  the  Pacific  Ocean,  and  to  secure  to 
the  Government  the  use  of  the  same  for  Postal,  Military,  and  other 
purposes. 

[Section  i  names  158  men,  from  twenty-four  states  and  one  territory,  who, 
“together  with  five  commissioners  to  be  appointed  by  the  Secretary  of  the  Inte¬ 
rior,  and  all  persons  who  shall  or  may  be  associated  with  them,  and  their  suc¬ 
cessors,”  are  incorporated  under  the  title  of  The  Union  Pacific  Railroad  Com¬ 
pany.  It  provides  that  “the  capital  stock  of  said  company  shall  consist  of 
one  hundred  thousand1  shares  of  one  thousand  dollars1  each,  which  shall  be 
subscribed  for  and  held  in  not  more  than  two  hundred  shares  by  any  one  per¬ 
son.”1  The  163  persons  referred  to  above  are  constituted  the  “Board  of  Com¬ 
missioners  of  the  Union  Pacific  Railroad  and  Telegraph  Company,”  a  modifi¬ 
cation  of  the  name  previously  used,  and  the  organization  of  the  Board  is 
directed  to  take  place  within  three  months.  Books  for  subscriptions  of  stock 
are  to  be  opened,  and  10  per  cent,  on  such  subscriptions  required  in  cash. 
The  next  sentence  provides  that  when  2000  shares  are  subscribed  for  and  ten 
dollars  per  share  paid  in  —  1  per  cent.,  not  10  percent.,  —  the  Board  shall  call 
a  meeting  of  the  stockholders,  at  which  meeting  there  shall  be  elected  not  less 
than  thirteen2  directors.  The  duties  of  the  Board  terminate  with  the  formal¬ 
ities  connected  with  this  first  election,  and  the  Board  ceases  to  exist.  There¬ 
after  the  stockholders  constitute  the  company.] 

At  the  time  of  the  first  and  each  triennial  election  of  directors  by  the  stock¬ 
holders,  two3  additional  directors  shall  be  appointed  by  the  President  of  the 
United  States,  who  shall  act  with  the  body  of  directors,  and  to  be  denominated 
directors  on  the  part  of  the  Government ;  any  vacancy  happening  in  the  Gov¬ 
ernment  directors  at  any  time  may  be  filled  by  the  President  of  the  United 
States.  The  directors  to  be  appointed  by  the  President  shall  not  be  stock¬ 
holders  in  the  Union  Pacific  Railroad  Company.  The  directors  so  chosen 
shall,  as  soon  as  may  be  after  their  election,  elect  from  their  own  number  a 
president  and  vice  president,  and  shall  also  elect  a  treasurer  and  secretary. 

1  Amended  by  sec.  1  of  the  Act  of  1864.  See  page  no  below. 

2  Amended  by  sec.  13  of  the  Act  of  1864.  See  page  113  below. 

3  Ibid. 

101 


102 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


No  person  shall  be  a  director  in  said  company  unless  he  shall  be  a  bona  fide 
owner  of  at  least  five1  shares  of  stock  in  the  said  company,  except  the  two 
directors  to  be  appointed  by  the  President  as  aforesaid. 

Sec.  2.  And  be  it  further  e7iacted,  That  the  right  of  way  through  the  pub¬ 
lic  lands  be,  and  the  same  is,  hereby  granted  to  the  said  company  for  the  con¬ 
struction  of  said  railroad  and  telegraph  line,  and  the  right,  power,  and  authority 
is  hereby  given  to  said  company  to  take  from  the  public  lands  adjacent  to  the 
line  of  said  road,  earth,  stone,  timber  and  other  materials  for  the  construction 
thereof ;  said  right  of  way  is  granted  to  said  railroad  to  the  extent  of  two  hun¬ 
dred2  feet  in  width  on  each  side  of  said  railroad  where  it  may  pass  over  the 
public  lands,  including  all  necessary  ground  for  stations,  buildings,  workshops, 
and  depots,  machine  shops,  switches,  side  tracks,  turntables,  and  water  sta¬ 
tions.  The  United  States  shall  extinguish  as  rapidly  as  may  be  the  Indian 
titles  to  all  lands  falling  under  the  operation  of  this  act  and  required  for  the 
said  right  of  way  and  grants  hereinafter  made. 

Sec.  3.  And  be  it  further  enacted ,  That  there  be,  and  is  hereby  granted  to 
the  said  company,  for  the  purpose  of  aiding  in  the  construction  of  said  rail¬ 
road  and  telegraph  line,  and  to  secure  the  safe  and  speedy  transportation  of 
the  mails,  troops,  munitions  of  war,  and  public  stores  thereon,  every  alternate 
section  of  public  land,  designated  by  odd  numbers,  to  the  amount  of  five3 
alternate  sections  per  mile  on  each  side  of  railroad,  on  the  line  thereof,  and 
within  the  limits  of  ten2  miles  on  each  side  of  said  road,  not  sold,  reserved, 
or  otherwise  disposed  of  by  the  United  States,  and  to  which  a  preemption  or 
homestead  claim  may  not  have  been  attached,  at  the  time  the  line  of  said 
road  is  definitely  fixed:  Provided ,  That  all  mineral  lands4  shall  be  excepted 
from  the  operation  of  this  act ;  but  where  the  same  shall  contain  timber,  the 
timber  thereon  is  hereby  granted  to  said  company.  And  all  such  lands,  so 
granted  by  this  section,  which  shall  not  be  sold  or  disposed  of  by  said  com¬ 
pany  within  three  years  after  the  entire  road  shall  have  been  completed,  shall 
be  subject  to  settlement  and  preemption,  like  other  lands,  at  a  price  not 
exceeding  one  dollar  and  twenty-five  cents  per  acre,  to  be  paid  to  said  com¬ 
pany. 

Sec.  4.  And  be  it  further  enacted,  That  whenever  said  company  shall  have 
completed  forty5  consecutive  miles  of  any  portion  of  said  railroad  and  tele¬ 
graph  line,  ready  for  the  service  contemplated  by  this  act,  and  supplied  by 
■all  necessary  drains,  culverts,  viaducts,  crossings,  sidings,  bridges,  turnouts, 

1  Amended  by  sec.  1  of  the  Act  of  1864. 

2  Amended  by  sec.  3  of  the  Act  of  1864.  See  page  no  below. 

3  Ibid.,  sec.  4. 

4  Ibid.,  sec.  4. 

s  Ibid.,  sec.  10. 


APPENDIX. 


103 


watering  places,  depots,  equipments,  furniture,  and  all  other  appurtenances 
of  a  first  class  railroad,  the  rails  and  all  the  other  iron  used  in  the  construc¬ 
tion  and  equipment  of  said  road  to  be  American  manufacture  of  the  best 
quality,  the  President  shall  appoint  three  commissioners  to  examine  the  same 
and  report  to  him  in  relation  thereto ;  and  if  it  shall  appear  to  him  that 
forty3  consecutive  miles  of  said  railroad  and  telegraph  line  have  been  com¬ 
pleted  and  equipped  in  all  respects  as  required  by  this  act,  then,  upon  certifi¬ 
cate  of  said  commissioners  to  that  effect,  patents  shall  issue  conveying  the 
right  and  title  to  said  lands  to  said  company,  on  each  side  of  the  road  as  far 
as  the  same  is  completed,  to  the  amount  aforesaid,  and  patents  shall  in  like 
manner  issue  as  each  forty  miles  of  said  railroad  and  telegraph  line  are 
completed,  upon  certificate  of  said  commissioners.  Any  vacancies  occurring 
in  said  board  of  commissioners  by  death,  resignation  or  otherwise,  shall  be 
filled  by  the  President  of  the  United  States :  Provided ,  however,  That  no 
such  commissioners  shall  be  appointed  by  the  President  of  the  United  States 
unless  there  shall  be  presented  to  him  a  statement,  verified  on  oath  by  the 
president  of  said  company,  that  such  forty  miles  have  been  completed,  in  the 
manner  required  by  this  act,  and  setting  forth  with  certainty  the  points, 
where  such  forty  miles  begin  and  where  the  same  end ;  which  oath  shall  be 
taken  before  a  judge  of  a  court  of  record. 

Sec.  5.  And  be  it  further  enacted ,  That  for  the  purposes  herein  mentioned 
the  Secretary  of  the  Treasury  shall,  upon  the  certificate  in  writing  of  said  com¬ 
missioners,  of  the  completion  and  equipment  of  forty1  consecutive  miles  of  said 
railroad  and  telegraph,  in  accordance  with  the  provisions  of  this  act,  issue  to 
said  company  bonds  of  the  United  States  of  one  thousand  dollars  each,  payable 
in  thirty  years  after  date,  bearing  6  per  centum  per  annum  interest  (said  inter¬ 
est  payable  semi-annually),  which  interest  may  be  paid  in  United  States  treas¬ 
ury  notes  or  any  other  money  or  currency  which  the  United  States  shall 
have  or  shall  declare  lawful  money  and  a  legal  tender,  to  the  amount  of  six¬ 
teen  of  said  bonds  per  mile  for  such  section  of  forty1  miles  ;  and  to  secure  the 
repayment  of  the  United  States,  as  hereinafter  provided,  of  the  amount  of 
said  bonds  so  issued  and  delivered  to  said  company,  together  with  all  interest 
thereon  which  shall  have  been  paid  by  the  United  States,  the  issue  of  said 
bonds  and  delivery  to  the  company  shall  ipso  facto  constitute  a  first 1  mortgage 
on  the  whole  line  of  railroad  and  telegraph,  together  with  the  rolling  stock,, 
fixtures  and  property  of  every  kind  and  description,  and  in  consideration  of 
which  said  bonds  may  be  issued  ;  and  on  the  refusal  or  failure  of  said  com¬ 
pany  to  redeem  said  bonds,  or  any  part  of  them,  when  required  to  do  so  by  the 
Secretary  of  the  Treasury,  in  accordance  with  the  provisions  of  this  act,  the  said 
road,  with  all  the  rights,  functions,  immunities  and  appurtenances  thereunto 
belonging,  and  also  all  lands  granted  to  the  said  company  by  the  United 

Amended  by  sec.  10  of  the  Act  of  1864.  See  page  112  below. 


104 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


States,  which,  at  the  time  of  said  default,  shall  remain  in  the  ownership  of 
said  company,  may  be  taken  possession  of  by  the  Secretary  of  the  Treasury, 
for  the  use  and  benefit  of  the  United  States :  Provided,  This  section  shall  not 
apply  to  that  part  of  any  road  now  constructed. 

Sec.  6.  And  be  it  further  enacted,  That  the  grants  aforesaid  are  made 
upon  condition  that  said  company  shall  pay  the  bonds  at  maturity,  and  shall  keep 
said  railroad  and  telegraph  line  in  repair  and  use,  and  shall  at  all  times  trans¬ 
mit  dispatches  over  said  telegraph  line,  and  transport  mails,  troops  and  muni¬ 
tions  of  war,  supplies,  and  public  stores  upon  said  railroad  for  the  Government, 
whenever  required  to  do  so  by  any  department  thereof,  and  that  the  Govern¬ 
ment  shall  at  all  times  have  the  preference  in  the  use  of  the  same  for  all  pur¬ 
poses  aforesaid  (at  fair  and  reasonable  rates  of  compensation,  not  to  exceed 
the  amounts  paid  by  private  parties  for  the  same  kind  of  service)  ;  and  all 
compensation  for  services  rendered  for  the  government  shall  be  applied  to  the 
payment  of  said  bonds  and  interest  until  the  whole  amount  is  fully  paid.  Said 
company  may  also  pay  the  United  States,  wholly  or  in  part,  in  the  same  or 
other  bonds,  Treasury  notes,  or  other  evidences  of  debt  against  the  United 
States,  to  be  allowed  at  par ;  and  after  said  road  is  completed,  until  said  bonds 
and  interest  are  paid,  at  least  5  per  centum  of  the  net  earnings  of  said  road 
shall  also  be  annually  applied  to  the  payment  thereof. 

Sec.  7.  And  be  it  further  enacted,  That  said  company  shall  file  their 
assent  to  this  act,  under  the  seal  of  said  company,  in  the  Department  of  the 
Interior,  within  one  year  after  the  passage  of  this  act,  and  shall  complete  the 
railroad  and  telegraph  from  the  point  of  beginning  as  herein  provided,  to  the 
western  boundary  of  Nevada  territory  before  the  first  day  of  July,  one  thousand 
eight  hundred  and  seventy-four:1  Provided,  That  within  two1  years  after  the 
passage  of  this  act  said  company  shall  designate  the  general  route  of  said 
road,  as  near  as  may  be,  and  shall  file  a  map  of  the  same  in  the  Department 
of  the  Interior,  whereupon  the  Secretary  of  the  Interior  shall  cause  the  lands 
within  fifteen  miles  of  said  designated  route  or  routes  to  be  withdrawn  from 
preemption,  private  entry,  and  sale ;  and  when  any  portion  of  said  route  shall 
be  finally  located,  the  Secretary  of  the  Interior  shall  cause  the  said  lands  here¬ 
inbefore  granted  to  be  surveyed  and  set  off  as  fast  as  may  be  necessary  for 
the  purpose  hereinbefore  named  :  Provided,  That  in  fixing  the  point  of  con¬ 
nection  of  the  main  trunk  with  the  eastern  connections,  it  shall  be  fixed  at  the 
most  practical  point  for  the  construction  of  the  Iowa  and  Missouri  branches, 
as  hereinafter  provided. 

Sec.  8.  A  fid  be  it  further  enacted ,  That  the  line  of  said  railroad  and  tel¬ 
egraph  shall  commence  at  a  point  on  the  one-hundredth  meridian  of  longitude 

'Amended  by  sec.  5  of  the  Act  of  1864.  See  page  ill  below. 


APPENDIX. 


105 


west  from  Greenwich,  between  the  south  margin  of  the  Republican  river  and 
the  north  margin  of  the  valley  of  the  Platte  river,  in  the  Territory  of  Nebraska, 
at  a  point  to  be  fixed  by  the  President  of  the  United  States,  after  actual  sur¬ 
veys  ;  thence  running  westerly  upon  the  most  direct,  central,  and  practicable 
route,  through  the  territories  of  the  United  States  to  the  western  boundary  of 
the  Territory  of  Nevada,  there  to  meet  and  connect  with  the  line  of  the  Cen¬ 
tral  Pacific  Railroad  Company  of  California. 

Sec.  9.  And  be  it  fitrther  enacted ,  That  the  Leavenworth,  Pawnee,  and 
Western  Railroad  Company  of  Kansas  are  hereby  authorized  to  construct  a 
railroad  and  telegraph  line  from  the  Missouri  river  at  the  mouth  of  the  Kan¬ 
sas  river,  on  the  south  side  thereof,  so  as  to  connect  with  the  Pacific  Railroad 
of  Missouri,  at  the  aforesaid  point,  on  the  one-hundredth  meridian  of  longitude 
west  from  Greenwich,  as  herein  provided,  upon  the  same  terms  and  conditions 
in  all  respects  as  are  provided  in  this  act  for  the  construction  of  the  railroad 
and  telegraph  line  first  mentioned,  and  to  meet  and  connect  with  the  same  at 
the  meridian  of  longitude  aforesaid ;  and  in  case  the  general  route  or  line  of 
road  from  the  Missouri  river  to  the  Rocky  mountains  should  be  so  located  as 
to  require  a  departure  northwardly  from  the  proposed  line  of  said  Kansas  Rail¬ 
road  shall  be  made  so  as  to  conform  thereto ;  and  said  railroad  through  Kan¬ 
sas  shall  be  so  located  between  the  mouth  of  the  Kansas  river,  as  aforesaid, 
and  the  aforesaid  point,  on  the  one-hundredth  meridian  of  longitude,  that  the 
several  railroads  from  Missouri  and  Iowa,  herein  authorized  to  connect  with 
the  same,  can  make  connection  within  the  limits  prescribed  in  this  act,  pro¬ 
vided  the  same  can  be  done  without  deviating  from  the  general  direction  of 
the  whole  line  to  the  Pacific  coast.  The  route  in  Kansas  west  of  the  merid¬ 
ian  of  Fort  Riley,  to  the  aforesaid  point,  on  the  one-hundredth  meridian  of 
longitude,  to  be  subject  to  the  approval  of  the  President  of  the  United  States, 
and  to  be  determined  by  him  on  actual  survey.  And  said  Kansas  company 
may  proceed  to  build  said  railroad  to  the  aforesaid  point,  on  the  one-hundredth 
meridian  of  longitude  west  from  Greenwich,  in  the  Territory  of  Nebraska. 
The  Central  Pacific  Railroad  Company  of  California,  a  corporation  existing 
under  the  laws  of  the  State  of  California,  are  hereby  authorized  to  construct  a 
railroad  and  telegraph  line  from  the  Pacific  coast,  at  or  near  San  Francisco, 
or  the  navigable  waters  of  the  Sacramento  river,  to  the  eastern  boundary  of 
California,  upon  the  same  terms  and  conditions  in  all  respects,  as  are  con¬ 
tained  in  this  act  for  the  construction  of  said  railroad  and  telegraph  line  first 
mentioned,  and  to  meet  and  connect  with  the  first  mentioned  railroad  and  tel¬ 
egraph  line  on  the  eastern  boundary  of  California.  Each  of  said  companies 
shall  file  their  acceptance  of  the  conditions  of  this  act  in  the  Department  of 
the  Interior  within  six  months  after  the  passage  of  this  act. 

Sec.  10.  And  be  it  further  enacted,  That  the  said  company  chartered  by 
the  state  of  Kansas  shall  complete  one  hundred  miles  of  their  said  road, 


106  HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 

commencing  at  the  mouth  of  the  Kansas  river,  as  aforesaid,  within  two  years 
after  filing  their  assent  to  the  conditions  of  this  act  as  herein  provided,  and 
one  hundred  miles  per  year  thereafter  until  the  whole  is  completed,  and  the 
said  Central  Pacific  Railroad  of  California  shall  complete  fifty  miles  of  their 
said  road  within  two  years  after  filing  their  assent  to  the  provisions  of  this 
act,  as  herein  provided,  and  fifty1  miles  per  year  thereafter  until  the  whole 
is  completed ;  and  after  completing  their  roads,  respectively,  said  companies, 
or  either  of  them,  may  unite  upon  equal  terms  with  the  first  named  company 
in  constructing  so  much  of  said  railroad  and  telegraph  line  and  branch  rail¬ 
roads  and  telegraph  lines  in  this  act  hereinafter  mentioned,  through  the  ter¬ 
ritories  from  the  state  of  California  to  the  Missouri  river,  as  shall  then 
remain  to  be  constructed,  on  the  same  terms  and  conditions  as  provided  in 
this  act  in  relation  to  the  said  Union  Pacific  Railroad  Company.  And  the 
Hannibal  and  St.  Joseph  Railroad,  the  Pacific  Railroad  Company  of  Missouri, 
and  the  first  named  company,  or  either  of  them,  on  filing  their  assent  to  this 
act,  as  aforesaid,  may  unite  upon  equal  terms,  under  this  act,  with  the  said 
Kansas  company,  in  constructing  said  railroad  and  telegraph,  to  said  merid¬ 
ian  of  longitude,  with  the  consent  of  said  State  of  Kansas,  and  in  case  said 
first  named  company  shall  complete  their  line'-  to  the  eastern  boundary  of 
California  before  it  is  completed  across  said  State  by  the  Central  Pacific 
Railroad  Company  of  California,  said  first  named  company  is  hereby  author¬ 
ized  to  continue  in  constructing  the  same  through  California,  with  the  con¬ 
sent  of  said  State,  upon  the  terms  mentioned  in  this  act,  until  said  roads 
shall  meet  and  connect,  and  the  whole  line  of  said  railroad  is  completed ;  and 
the  Central  Pacific  Railroad  Company  of  California,  after  completing  its 
road  across  said  State,  is  authorized  to  continue  the  construction  of  said  rail¬ 
road  and  telegraph  through  the  Territories  of  the  United  States2  to  the  Mis¬ 
souri  river,  including  the  branch  roads  specified  in  this  act,  upon  the  routes 
hereinbefore  and  hereinafter  indicated,  on  the  terms  and  conditions  provided 
in  this  act  in  relation  to  the  said  Union  Pacific  Railroad  Company,  until  said 
roads  shall  meet  and  connect,  and  the  whole  line  of  said  railroad  and 
branches  and  telegraph  is  completed. 

Sec.  ii.  And  be  it  fiirther  enacted,  That  for  three  hundred  miles  of  said 
road  most  mountainous  and  difficult  of  construction,  to  wit :  one  hundred 
and  fifty  miles  westwardly  from  the  eastern  base  of  the  Rocky  mountains, 
and  one  hundred  and  fifty  miles  eastwardly  from  the  western  base  of  the 
Sierra  Nevada  mountains,  said  points  to  be  fixed  by  the  President  of  the 
United  States,  the  bonds  to  be  issued  to  aid  in  the  construction  thereof  shall 
be  treble  the  number  per  mile  hereinbefore  provided,  and  the  same  shall  be 
issued,  and  the  lands  herein  granted  be  set  apart,  upon  the  construction  of 

1  Amended  by  sec.  5  of  the  Act  of  1864.  See  page  ill  below. 

2  Ibid.,  sec.  16. 


APPENDIX. 


10/ 


every  twenty  miles  thereof,  upon  the  certificate  of  the  commissioners  afore¬ 
said  that  twenty  consecutive  miles  of  the  same  are  completed  ;  and  between 
the  sections  last  named  of  one  hundred  and  fifty  miles  each,  the  bonds  to  be 
issued  to  aid  in  the  construction  thereof,  shall  be  double  the  number  per 
mile  first  mentioned,  and  the  same  shall  be  issued  and  the  lands  herein 
granted  be  set  apart,  upon  the  construction  of  every  twenty  miles  thereof, 
upon  the  certificate  of  the  commissioners  as  aforesaid  that  twenty  consecu¬ 
tive  miles  of  the  same  are  completed :  Provided  that  no  more  than  fifty  thou¬ 
sand  of  said  bonds  shall  be  issued  under  this  act  to  aid  in  constructing  the 
main  line  of  said  railroad  and  telegraph. 

Sec.  12 . The  track  upon  the  entire  line  of  railroad  and  branches 

shall  be  of  uniform  width,  to  be  determined  by  the  President  of  the  United 
States,  so  that  when  completed,  cars  can  be  run  from  the  Missouri  river  to 
the  Pacific  coast ;  the  grades  and  curves  shall  not  exceed  the  maximum 
grades  and  curves  of  the  Baltimore  and  Ohio  Railroad  ;  the  whole  line  of  said 
railroad  and  branches  and  telegraph  shall  be  operated  and  used  for  all  pur¬ 
poses  of  communication,  travel,  and  transportation,  so  far  as  the  public  and 
government  are  concerned,  as  one  connected  continuous  line ;  .  .  .  . 

[Sec.  13.  Provided  that  the  Hannibal  and  St.  Joseph  Railroad  Company 
might  extend  its  road  from  St.  Joseph  via  Atchison  to  connect  with  the  Kan¬ 
sas  line  upon  the  same  terms  as  were  given  to  the  Union  Pacific ;  or,  if  desir¬ 
able,  it  might  connect  instead  with  the  line  westward  from  Omaha,  but  in 
this  case  its  subsidy  was  to  cover  only  the  one  hundred  miles  lying  next  to 
the  Missouri  River.  The  Leavenworth,  Pawnee  and  Western  also  was  author¬ 
ized  to  build  from  Leavenworth  a  line  which  should  unite  it  with  the  line 
from  Kansas  City.] 

Sec.  14.  And  be  it  further  enacted,  That  the  said  Union  Pacific  Railroad 
Company  is  hereby  authorized  and  required  to  construct  a  single  line  of  rail¬ 
road  and  telegraph  from  a  point  on  the  western  boundary  of  the  State  of 
Iowa,  to  be  fixed  by  the  President  of  the  United  States,  upon  the  most  direct 
and  practicable  route,  to  be  subject  to  his  approval,  so  as  to  form  a  connec¬ 
tion  with  the  lines  of  said  company  at  some  point  on  the  one-hundredth  merid¬ 
ian  of  longitude  aforesaid,  from  the  point  of  commencement  on  the  western 
boundary  of  the  State  of  Iowa,  upon  the  same  terms  and  conditions,  in  all 
respects,  as  are  contained  in  this  act  for  the  construction  of  the  said  railroad 
and  telegraph  first  mentioned ;  and  the  said  Union  Pacific  Railroad  Company 
shall  complete  the  one  hundred  miles  of  road  and  telegraph  in  this  section 
provided  for,  in  two  years  after  filing  their  assent  to  the  conditions  of  this 
act,  as  by  the  terms  of  this  act  required,  and  at  the  rate  of  one  hundred  miles 
per  year  thereafter,  until  the  whole  is  completed  :  Provided ,  That  a  failure 
upon  the  part  of  said  company  to  make  said  connection  in  the  time  aforesaid, 


io8 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


and  to  perform  the  obligations  imposed  on  said  company  by  this  section  and 
to  operate  said  road  in  the  same  manner  as  the  main  line  shall  be  operated, 
shall  forfeit  to  the  Government  of  the  United  States  all  the  rights,  privileges,  and 
franchises  granted  to  and  conferred  upon  said  company  by  this  act.  And  when¬ 
ever  there  shall  be  a  line  of  railroad  completed  through  Minnesota  or  Iowa  to 
Sioux  City,  then  the  said  Pacific  Railroad  Company  is  hereby  authorized  and 
required  to  construct  a  railroad  and  telegraph  from  said  Sioux  City  upon  the 
most  direct  and  practicable  route  to  a  point  on,  and  so  as  to  connect  with,  the 
branch  railroad  and  telegraph  in  this  section  hereinbefore  mentioned,  or  with 
the  said  Union  Pacific  Railroad,  said  point  of  junction  to  be  fixed  by  the  Pres¬ 
ident  of  the  United  States,  not  further  west  than  the  one-hundredth  meridian 
of  longitude  aforesaid,  and  on  the  same  terms  and  conditions  as  provided  in 
this  act  for  the  construction  of  the  Union  Pacific  Railroad  as  aforesaid,  and  to 
complete  the  same  at  the  rate  of  one  hundred  miles  per  year ;  and  should 
said  company  fail  to  comply  with  the  requirements  of  this  act  in  relation  to 
the  said  Sioux  City  railroad  and  telegraph,  the  said  company  shall  suffer  the 
same  forfeiture  prescribed  in  relation  to  the  Iowa  branch  railroad  and  tele¬ 
graph  hereinbefore  mentioned.1 

Sec.  i  6.  And  be  it  further  e7iacted ,  That  at  any  time  after  the  passage  of 
this  act  all  the  railroad  companies  named  herein,  and  assenting  hereto,  or  any 
two  or  more  of  them  are  authorized  to  form  themselves  into  one  consolidated 
company ;  notice  of  such  consolidation,  in  writing,  shall  be  filed  in  the  Depart¬ 
ment  of  the  Interior,  and  such  consolidated  company  shall  thereafter  proceed 
to  construct  said  railroad  and  branches  and  telegraph  line  upon  the  terms 
and  conditions  provided  in  this  act. 

Sec  17.  And  be  it  further  enacted ,  That  in  case  said  company  or  com¬ 
panies  shall  fail  to  comply  with  the  terms  and  conditions  of  this  act,  by  not 
completing  said  railroad  and  telegraph  and  branches  within  a  reasonable 
time,  or  by  not  keeping  the  same  in  repair  and  use,  but  shall  permit  the  same, 
for  an  unreasonable  time,  to  remain  unfinished  or  out  of  repair,  and  unfit  for 
use,  Congress  may  pass  any  act  to  insure  the  speedy  completion  of  said  road 
and  branches,  or  put  the  same  in  repair  and  use,  and  may  direct  the  income 
of  said  railroad  and  telegraph  line  to  be  thereafter  devoted  to  the  use  of  the 
United  States,  to  repay  all  such  expenditures  caused  by  the  default  and  neg¬ 
lect  of  such  company  or  companies :  Provided ,  That  if  said  roads  are  not 
completed  so  as  to  form  a  continuous  line  of  railroad,  ready  for  use,  from  the 
Missouri  river  to  the  navigable  waters  of  the  Sacramento  river  in  California, 
by  the  first  day  of  July,  eighteen  hundred  and  seventy-six,2  the  whole  of  all 
said  railroads  before  mentioned  and  to  be  constructed  under  the  provisions 

1  Amended  by  sec.  17  of  the  Act  of  1864.  See  page  114  below. 

2 Amended  by  sec.  5  of  the  Act  of  1864.  See  page  ill  below. 


APPENDIX. 


109 


of  this  act,  together  with  all  their  furniture,  fixtures,  rolling  stock,  machine 
shops,  lands,  tenements,  and  hereditaments,  and  property  of  every  kind 
and  character,  shall  be  forfeited  to  and  be  taken  possession  of  by  the 
United  States :  Provided ,*  That  of  the  bonds  of  the  United  States  in  this 
act  provided  to  be  delivered  for  any  and  all  parts  of  the  roads  to  be  con¬ 
structed  east  of  the  one-hundredth  meridian  of  longitude  west  from  Green¬ 
wich,  and  for  any  part  of  the  road  west  of  the  west  foot  of  the  Sierra 
Nevada  mountains,  there  shall  be  reserved  of  each  part  and  installment 
twenty-five  per  centum,  to  be  and  remain  in  the  United  States  Treasury, 
undelivered,  until  said  road  and  all  parts  thereof  provided  for  in  that  act  are 
entirely  completed,  and  of  all  the  bonds  provided  to  be  delivered  for  the 
said  road,  between  the  two  points  aforesaid,  there  shall  be  reserved  out  of 
each  installment  fifteen  per  centum,  to  be  and  remain  in  the  Treasury  until 
the  whole  of  the  road  provided  for  in  this  act  is  fully  completed  ;  and  if  the 
said  road  or  any  part  thereof  shall  fail  of  completion  at  the  time  limited 
therefor  in  this  act,  then  and  in  that  case,  the  said  part  of  said  bonds  so 
reserved  shall  be  forfeited  to  the  United  States. 

Sec.  18.  And  be  it  fw'ther  enacted,  That  whenever  it  appears  that  the 
net  earnings  of  the  entire  road  and  telegraph,  including  the  amount  allowed 
for  services  rendered  the  United  States,  including  repairs,  and  the  fur¬ 
nishing,  running,  and  managing  of  said  road,  shall  exceed  ten  per  centum 
upon  its  cost,  exclusive  of  the  five  per  centum  to  be  paid  to  the  United  States, 
Congress  may  reduce  the  rates  of  fare  thereon,  if  unreasonable  in  amount, 
and  may  fix  and  establish  the  same  by  law.  And  the  better  to  accomplish 
the  objects  of  this  act,  namely,  to  promote  the  public  interest  and  welfare  by 
the  construction  of  said  railroad  and  telegraph  line,  and  keeping  the  same  in 
working  order,  and  to  secure  to  the  Government  at  all  times  (but  particularly 
in  time  of  war)  the  use  and  benefits  of  the  same  for  postal,  military,  and  other 
purposes,  Congress  may,  at  any  time,  having  due  regard  for  the  rights  of  said 
companies  named  herein,  add  to,  alter,  amend,  or  repeal  this  act. 

Sec.  20.  And  be  it  further  enacted ,  That  the  corporation  hereby  created 
and  the  roads  connected  therewith,  under  the  provisions  of  this  act,  shall  make 
to  the  Secretary  of  the  Treasury,  an  annual  report  wherein  shall  be  set  forth  — 

First.  The  names  of  the  stockholders  and  their  places  of  residence,  so  far 
as  the  same  can  be  ascertained ; 

Second.  The  names  and  residences  of  the  directors,  and  all  other  officers 
of  the  company  ; 

Third.  The  amount  of  stock  subscribed,  and  the  amount  thereof  actually 
paid  in  ; 

Fourth.  A  description  of  the  lines  of  road  surveyed,  of  the  lines  thereof 
fixed  upon  for  the  construction  of  the  road,  and  the  cost  of  such  surveys  ; 

1  Repealed  by  sec.  7  of  the  Act  of  1864.  See  page  hi  below. 


I  10 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


Fifth.  The  amount  received  from  passengers  on  the  road  ; 

Sixth.  The  amount  received  for  freight  thereon ; 

Seventh.  A  statement  of  the  expense  of  said  road  and  its  fixtures ; 

Eighth.  A  statement  of  the  indebtedness  of  said  company,  setting  forth 
the  various  kinds  thereof :  Which  report  shall  be  sworn  to  by  the  president  of 
said  company,  and  shall  be  presented  to  the  Secretary  of  the  Treasury  on  or 
before  the  first  day  of  July  in  each  year. 

Approved  July  i,  1862. 


An  Act  to  amend  an  Act  entitled  “An  Act  to  aid  in  the  construction  of  a 
Railroad  and  Telegraph  Line  from  the  Mississippi  River  to  the  Pacific 
Ocean,  and  to  secure  to  the  Government  the  use  of  the  same  for  postal, 
military,  and  other  purposes,”  approved  July  first,  eighteen  hundred  and 
sixty-two. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  m  Cojigress  asse?nbled,  That  the  capital  stock  of  the  com¬ 
pany  entitled  the  Union  Pacific  Railroad  Company,  authorized  by  the  act  of 
which  this  act  is  amendatory,  shall  be  in  shares  of  one  hundred  dollars, 
instead  of  one  thousand  dollars  each  ;  that  the  number  of  shares  shall  be  one 
million,  instead  of  one  hundred  thousand ;  and  that  the  number  of  shares 
which  any  person  shall  hold  to  entitle  him  to  serve  as  a  director  in  said  com¬ 
pany  (except  the  five  directors  to  be  appointed  by  Government)  shall  be  fifty 
shares,  instead  of  five  shares ;  and  that  every  subscriber  to  said  capital  stock 
for  each  share  of  one  thousand  dollars,  heretofore  subscribed,  shall  be  entitled 
to  a  certificate  for  ten  shares  of  one  hundred  dollars  each  ;  and  that  the  fol¬ 
lowing  words  in  section  first  of  said  act,  “  which  shall  be  subscribed  for  and 
held  in  not  more  than  two  hundred  shares  by  any  one  person,”  be,  and  the 
same  are  hereby  repealed. 

[Section  2  provided  that,  until  the  whole  capital  of  one  hundred  million 
dollars  was  subscribed,  books  for  receiving  stock  subscriptions  should  be  kept 
open  in  seven  cities  which  were  named  ;  that  the  cash  payments  required  on 
subscriptions  should  continue  the  same  ;  that  the  stockholders  should  be 
assessed  on  their  holdings  sums  not  less  than  five  dollars  per  share,  at  inter¬ 
vals  not  greater  than  six  months,  until  the  full  value  had  been  paid  in  ;  that 
only  money  should  be  received  in  payment ;  that  the  capital  stock  should  not 
be  increased  beyond  the  actual  cost  of  the  road.] 

[Section  3  reduced  the  width  of  the  right  of  way  to  two  hundred  feet,  and 
provided  elaborate  machinery  for  obtaining  possession  of  private  lands  needed 
by  the  road.] 

[Section  4  amended  section  3  of  the  Act  of  1862  so  that  ten  sections  of  land 
on  each  side  of  the  track,  instead  of  five,  were  given  for  each  running  mile  of 


APPENDIX. 


I  I  I 


the  road,  this  land  lying  within  twenty,  instead  of  ten,  miles  of  the  track.  It 
provided  that  in  the  Act  of  1862  the  term  “mineral  land”  should  not  be  con¬ 
strued  to  mean  coal  and  iron  land.  It  debarred  the  road  from  cutting  timber 
at  a  greater  distance  from  its  tracks  than  ten  miles.  It  exempted  from  the 
provisions  of  this  act  and  the  Act  of  1862  all  lands  located  or  selected  for  loca¬ 
tion  under  “An  act  donating  lands  to  the  several  States  and  Territories  which 
may  provide  colleges  for  the  benefit  of  agriculture  and  the  mechanic  arts,” 
approved  July  2,  1862.] 

[Section  5  extended  one  year  the  time  for  filing  maps  of  the  proposed  routes 
and  for  completing  the  roads ;  provided  that  the  Central  Pacific  company 
need  complete  but  twenty-five  miles  of  track  per  year,  instead  of  fifty,  and 
that  it  be  given  four  years  to  reach  the  state  line ;  it  provided,  further,  that 
one-half,  instead  of  the  whole,  of  the  sums  earned  by  the  roads  by  serving  the 
government  should  be  applied  on  the  debt  to  the  Government.] 

[Section  6  modified  section  4  of  the  Act  of  1862  so  as  to  render  it  easier  to 
get  possession  of  the  subsidies,  and  provided  that  the  Central  Pacific  should 
receive  its  subsidies  on  the  completion  of  twenty-mile  sections  instead  of  forty- 
mile  sections.] 

[Section  7  repealed  that  part  of  section  17  of  the  Act  of  1862,  which  pro¬ 
vided  for  a  reservation  by  the  Government  of  a  part  of  the  bond  subsidy.  It 
provided  further  that  the  failure  of  any  one  company  fully  to  comply  with  the 
conditions  of  this  act  and  the  Act  of  1862,  should  work  no  forfeiture  for  the 
others.] 

Sec.  8.  And  be  it  further  enacted,  That  for  the  purpose  of  facilitating  the 
work  on  said  railroad,  and  of  enabling  the  said  company  as  early  as  practica¬ 
ble  to  commence  the  grading  of  said  railroad  in  the  region  of  the  mountains, 
between  the  eastern  base  of  the  Rocky  mountains  and  the  western  base  of  the 
Sierra  Nevada  mountains,  so  that  the  same  may  be  finally  completed  within 
the  time  required  by  law,  it  is  hereby  provided  that  whenever  the  chief 
engineer  of  the  said  company,  and  said  commissioners,  shall  certify  that  a 
certain  proportion  of  the  work  required  to  prepare  the  road  for  the  super¬ 
structure  on  any  such  section  of  twenty  miles  is  done,  (which  said  certificate 
shall  be  duly  verified,)  the  Secretary  of  the  Treasury  is  hereby  authorized  and 
required,  upon  the  delivery  of  such  certificate,  to  issue  to  said  company  a 
proportion  of  said  bonds,  not  exceeding  two-thirds  of  the  amount  of  bonds 
authorized  to  be  issued  under  the  provisions  of  the  act,  to  aid  in  the  construc¬ 
tion  of  such  section  of  twenty  miles,  nor  in  any  case  exceeding  two-thirds  of 
the  value  of  the  work  done,  the  remaining  one-third  to  remain  until  the  said 
section  is  fully  completed  and  certified  by  the  commissioners  appointed  by 
the  President,  according  to  the  terms  and  provisions  of  the  said  act ;  and  no 
such  bonds  shall  issue  to  the  Union  Pacific  Railroad  Company  for  work  done 
west  of  Salt  Lake  City  under  this  section,  more  than  three  hundred  miles  in 


I  12 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


advance  of  the  completed  continuous  line  of  said  railroad  from  the  point  of 
beginning  on  the  one-hundredth  meridian  of  longitude. 

[Sec.  9  gave  authority  to  each  of  the  companies  named  in  the  act  to 
establish  ferries  or  build  bridges  across  the  Missouri  or  other  rivers  which  lie 
in  its  course,  such  bridges  to  be  so  built  as  not  to  interfere  with  navigation.] 

And  provided  further,  That  any  company  authorized  by  this  act  to  con¬ 
struct  its  road  and  telegraph  line  from  the  Missouri  river  to  the  initial  point 
aforesaid,  may  construct  its  road  and  telegraph  line  so  as  to  connect  with  the 
Union  Pacific  railroad  at  any  point  westwardly  of  such  initial  point,  in  case 
such  company  shall  deem  such  westward  connection  more  practicable  or 
desirable ;  and  in  aid  of  the  construction  of  so  much  of  its  road  and  telegraph 
line  as  shall  be  a  departure  from  the  route  hereinbefore  provided  for  its  road, 
such  company  shall  be  entitled  to  all  the  benefits,  and  be  subject  to  all  the 
conditions  and  restrictions  of  this  act :  Provided  further,  however,  That  the 
bonds  of  the  United  States  shall  not  be  issued  to  such  company  for  a  greater 
amount  than  is  hereinbefore  provided,  if  the  same  had  united  with  the  Union 
Pacific  railroad  on  the  one-hundredth  degree  of  longitude  ;  nor  shall  such 
company  be  entitled  to  receive  any  greater  amount  of  alternate  sections  of 
public  land  than  are  also  herein  provided. 

Sec.  io.  And  be  it  further  enacted,  That  section  five  of  said  act  be  so 
modified  and  amended  that  the  Union  Pacific  Railroad  Company,  the  Central 
Pacific  Railroad  Company,  and  any  other  company  authorized  to  participate 
in  the  construction  of  said  road,  may,  on  the  completion  of  each  section  of  said 
road,  as  provided  in  said  act  and  the  act  to  which  this  act  is  an  amendment, 
issue  their  first-mortgage  bonds  on  their  respective  railroad  and  telegraph 
lines  to  an  amount  not  exceeding  the  amount  of  the  bonds  of  the  United 
States,  and  of  even  tenor  and  date,  time  of  maturity,  rate  and  character  of 
interest  with  the  bonds  authorized  to  be  issued  to  said  railroad  companies 
respectively.  And  the  lien  of  the  United  States  bonds  shall  be  subordinate 
to  that  of  the  bonds  of  any  or  either  of  said  companies  hereby  authorized  to 
be  issued  on  their  respective  roads,  property,  and  equipments,  except  as  to  the 
provisions  of  the  sixth  section  of  the  act  to  which  this  act  is  an  amendment, 
relating  to  the  transmission  of  dispatches  and  the  transportation  of  mails 
troops,  munitions  of  war,  supplies  and  public  stores  for  the  Government  of  the 
United  States.  And  said  section  is  further  amended  by  striking  out  the  word 
“forty,”  and  inserting  in  lieu  thereof  the  words  “on  each  and  every  section 
of  not  less  than  twenty.” 

[Sec.  i  i  provided  that  if  any  company  had  issued,  or  should  in  future 
issue,  bonds  which  were  a  lien  prior  to  the  guaranteed  bonds,  their  amount 
should  be  deducted  from  the  amount  of  the  government  and  first-mortgage 
bonds  which  that  company  would  otherwise  be  authorized  to  issue.  It  also 


APPENDIX. 


1 1 3 

provided  that  no  subsidies  should  be  given  on  roads  or  parts  of  roads  built 
before  the  passage  of  the  Act  of  1862.] 

[Sec.  12  provided  that  the  Union  Pacific,  eastern  division,  should  build  a 
branch  from  the  mouth  of  the  Kansas  river  by  way  of  Leavenworth,  or  else, 
within  two  years,  build  from  Leavenworth  to  Lawrence  ;  but  should  receive 
therefor  no  bond  subsidy.] 

And  if  the  Union  Pacific  Railroad  Company  shall  not  be  proceeding  in 
good  faith  to  build  the  said  railroad  through  the  Territories  when  the  .  .  . 
Union  Pacific  Railroad  Company,  eastern  division,  shall  have  completed  their 
road  to  the  one-hundredth  degree  of  longitude,  then  the  last-named  company 
may  proceed  to  make  said  road  westward  until  it  meets  and  connects  with  the 
Central  Pacific  Railroad  Company  on  the  same  line.  And  the  said  railroad 
from  the  mouth  of  Kansas  river  to  the  one-hundredth  meridian  of  longitude 
shall  be  made  by  the  way  of  Lawrence  and  Topeka,  or  on  the  bank  of  the 
Kansas  river  opposite  said  towns :  Provided ,  that  no  bonds  shall  be  issued  or 
land  certified  by  the  United  States  to  any  person  or  company,  for  the  con¬ 
struction  of  any  part  of  the  main  trunk  line  of  said  railroad  west  of  the  one- 
hundredth  meridian  of  longitude  and  east  of  the  Rocky  mountains,  until  said 
road  shall  be  completed  from  or  near  Omaha,  on  the  Missouri  river,  to  the  said 
one-hundredth  meridian  of  longitude. 

[Sec.  13  changed  the  number  of  elected  directors  to  fifteen,  and  of  govern¬ 
ment  directors  to  five.  It  provided  that  at  least  one  of  the  latter  must  be  a 
member  of  each  standing  or  special  committee,  and  provided  for  inspections 
of  the  property  and  reports  to  the  Government  by  the  Government  directors.] 

[Sec.  14  provided  that  the  next  election  of  directors  should  be  at  New 
York  on  the  first  Wednesday  in  October,  1864,  and  that  subsequent  elections 
should  be  annual,  at  the  same  place.] 

Sec.  15.  And  be  it  further  enacted ,  That  the  several  companies  authorized 
to  construct  the  aforesaid  roads  are  hereby  required  to  operate  and  use  said 
roads  and  telegraph  for  all  purposes  of  communication,  travel,  and  transporta¬ 
tion,  so  far  as  the  public  and  the  Government  are  concerned,  as  one  continu¬ 
ous  line ;  and  in  such  operation  and  use,  to  afford  and  to  secure  to  each  equal 
advantages  and  facilities  as  to  rates,  time,  and  transportation,  without  any 
discrimination  of  any  kind  in  favor  of  the  road  or  business  of  any  or  either  of 
said  companies,  or  adverse  to  the  road  or  business  of  any  or  either  of  the 
others,  and  it  shall  not  be  lawful  for  the  proprietors  of  any  line  of  telegraph, 
authorized  by  this  act,  or  the  act  amended  by  this  act,  to  refuse,  or  fail  to 
convey  for  all  persons  requiring  the  transmission  of  news  and  messages  of  like 
character,  on  pain  of  forfeiting  to  the  persons  injured  for  each  offense,  the  sum 
of  one  hundred  dollars,  and  such  other  damage  as  he  may  have  suffered  on 


HISTORY  OF  THE  UNION  PACIFIC  RAILWAY. 


I  14 

account  of  said  refusal  or  failure,  to  be  sued  for  and  recovered  in  any  court  of 
the  United  States,  or  of  any  State  or  Territory  of  competent  jurisdiction. 

Sec.  16.  And  be  it  further  e?iacted ,  That  any  two  or  more  of  the  companies 
authorized  to  participate  in  the  benefits  of  this  act,  are  hereby  authorized  at 
any  time  to  unite  and  consolidate  their  organizations,  as  the  same  may  or 
shall  be,  upon  such  terms  and  conditions,  and  in  such  manner  as  they  may 
agree  upon,  and  as  shall  not  be  incompatible  with  this  act,  or  the  laws  of  the 
State  or  States  in  which  the  roads  of  such  companies  may  be,  and  to  assume 
and  adopt  such  corporate  name  and  style  as  they  may  agree  upon,  with  a 
capital  stock  not  to  exceed  the  actual  cost  of  the  roads  so  to  be  consolidated, 
and  shall  file  a  copy  of  such  consolidation  in  the  Department  of  the  Interior ; 
and  thereupon  such  organization,  so  formed  and  consolidated,  shall  succeed 
to,  possess,  and  be  entitled  to  receive  from  the  Government  of  the  United 
States,  all  and  singular  the  grants,  benefits,  immunities,  guarantees,  acts,  and 
things  to  be  done  and  performed,  and  be  subject  to  the  same  terms,  conditions, 
restrictions  and  requirements  which  said  companies  respectively,  at  the  time 
of  such  consolidation,  are  or  may  be  entitled  or  subject  to  under  this  act,  in 
place  and  substitution  of  said  companies  so  consolidated  respectively.  And 
all  other  provisions  of  this  act,  so  far  as  applicable,  relating  or  in  any  manner 
appertaining  to  the  companies  so  consolidated,  or  either  thereof,  shall  apply 
and  be  of  force  as  to  such  consolidated  organization. 

[Section  16  provides  further  that  in  case  any  company  fails  wholly  or  in 
part  to  build  its  line  within  the  prescribed  time,  the  consolidated  company 
may  build  it  on  the  terms  originally  offered,  paying  to  the  defaulting  company 
the  value  of  the  work  done  and  materials  furnished.  But  the  defaulting 
company  may,  at  any  time  before  the  completion  of  the  work,  resume  all  its 
rights  by  paying  the  consolidated  company  the  value  of  the  work  done  and 
materials  furnished  by  it.  Any  company  refusing  to  enter  a  consolidation 
shall  have  equal  rights  with  the  consolidation.  It  is  further  provided  that 
should  the  Central  Pacific  Railroad  Company  of  California  complete  their  line 
to  the  eastern  line  of  the  State  of  California,  before  the  line  of  the  Union 
Pacific  Railroad  Company  shall  have  been  extended  westward  so  as  to  meet 
the  line  of  said  first-named  company,  said  first-named  company  may  extend 
their  line  of  road  eastward  one  hundred  and  fifty  miles  on  the  established 
route,  so  as  to  meet  and  connect  with  the  line  of  the  Union  Pacific  road,  com¬ 
plying  in  all  respects  with  the  provisions  and  restrictions  of  this  act  as  to  said 
Union  Pacific  road,  and  upon  doing  so,  shall  enjoy  all  the  rights,  privileges, 
and  benefits  conferred  by  this  act  on  said  Union  Pacific  Railroad  Company.] 

[Sec.  17  provided  that  the  branch  from  Sioux  City  might  be  built  by  a 
company  having  a  line  reaching  that  point  from  the  east,  instead  of  being 
built  by  the  Union  Pacific  Company,  as  per  Section  14  of  the  Act  of  1862. 


APPENDIX. 


1 1 5 

The  bond  subsidy  was  not  to  be  increased  by  this  change,  and  the  land  grant 
was  to  be  five  alternate  sections  on  each  side  of  the  track  for  each  running 
mile.  Failure  to  complete  this  line  within  ten  years  of  the  passage  of  this 
act  forfeited  the  portion  already  built.] 

[Secs,  i  8,  19,  and  20  referred  to  an  extension  of  the  Burlington  and 
Missouri  River  road  westward  to  a  junction  with  the  Union  Pacific  at  some 
point  east  of  the  one-hundredth  meridian.] 

[Sec.  21  provided  that  before  any  lands  should  be  given  to  the  company 
receiving  the  grant,  that  company  should  pay  the  cost  of  surveying,  selecting 
and  conveying  the  same.] 

[Sec.  22  reserved  to  Congress  the  right  to  alter,  amend,  or  repeal  this  act.] 

Approved  July  2,  1864. 


APPENDIX  II. 


TABLE  I. 

FIGURES  RELATING  TO  THE  UNION  PACIFIC  RAILROAD  COMPANY. 


(see  CHART  I.) 


Miles 

Operated 

Earnings 

Operating 

Expenses 

Taxes 

Operating 
Expenses  In¬ 
cluding  Taxes 

Surplus 

Earnings 

Ex¬ 

pense 

Ratio 

1869 

IO38.68 

1870 

$  7,625,277.11 

l4.S75.03I.36 

#102,383.48 

#4,677,414.84 

#2,947,862.27 

61.34 

1871 

7,521,682.16 

3,310,551.55 

284,015.31 

3,594,466.86 

3,921,115.30 

47.87 

1872 

8,892,605.53 

4,597,427.63 

203,145.85 

4,800,573.48 

4,092,032.05 

53-98 

1873 

10,266,103.66 

4,752,838.58 

222,022.44 

4,974,861.02 

5,291,242.64 

48.46 

1874 

10,559,880.12 

4,599,148.74 

255,555-13 

4,854,703.87 

5,705,176.25 

45-97 

1875 

11,993,832.09 

4,710,979.10 

271,068.85 

4,982,047.95 

7,011,784.14 

41-54 

1876 

12,886,858.84 

4,961,015.27 

307,I95-93 

5,268,21 1.20 

7,618,647.64 

40.88 

1877 

12,948,477.02 

5,283,129.20 

286,963.50 

5,570,092.70 

7,199,782.17 

42.88 

1878 

13,121,272.58 

4,989,610.79 

386,975.40 

5,376,586.19 

7,744,686.39 

40.98 

1879 

IO42.4O 

18,040,266.08 

7,930,078.79 

438,758.17 

8,368,836.96 

9,671,429.12 

46.38 

TABLE  II. 

FIGURES  RELATING  TO  THE  UNION  PACIFIC  RAILWAY  COMPANY. 


(see  CHART  II.) 


Miles 

Operated 

Earnings 

Operating 
Expenses,  not 
Including  Taxes 

Taxes 

Operating  Ex¬ 
penses,  Including 
Taxes 

Surplus 

Earnings 

Exp. 

Ratio, 

Taxes 

Incl’d 

1880 

1820.90 

#22,275,655.40 

#10,105,211.54 

$439,907-98 

#10,545,119.52 

$11,730,535-88 

47-34 

1881 

1820.90 

24,105,380.41 

12,086,331.22 

394,011-49 

12,480,342.71 

11,625,037.70 

51-77 

1882 

1820.90 

22,710,327.75 

10,239,262.74 

487,786.54 

10,727,049.28 

11,983,278.47 

47-23 

1883 

1820.90 

20,915,624.1 1 

9,849,399-70 

505,140.80 

10,354,540.50 

10,356,965.25 

50.48 

1884 

1831.90 

17,837,060.88 

8,424,925.23 

470,226.24 

8,895,151.47 

8,941,909.41 

49.87 

1885 

1832.45 

I7,455,03I-5I 

8,560,621.24 

489,733-96 

9,050,355-20 

8,404,676.31 

51.85 

1886 

1832.45 

17,806,132.59 

9,685,771.12 

597,654.45 

10,283,425.57 

7,552,707-02 

57-75 

1887 

1824.06 

19,546,088.62 

9,869,615.83 

564,585.94 

10,434,201.77 

9,1 1 1,886.85 

53.38 

1888 

1821.43 

19,898,816.93 

11,112,146.67 

667,202.10 

11,779,348.77 

8,119,468.16 

59.20 

1889 

1821.36 

I9,775,555-84 

10,878,359.78 

610,516.43 

1 1,488,876.21 

8,286,679.63 

58.10 

1890 

1821.42 

20,438,208.36 

12,573,820.43 

589,628.87 

13,163,449.30 

7,274,759.06 

64.41 

1891 

1821.86 

19,687,738.48 

1 1,290,528.18 

550,758.60 

11,841,286.78 

7,846,451.70 

60.15 

1892 

1821.86 

20,361,401.66 

11,256,622.86 

554,510.58 

11,811,133.44 

8,550,268.22 

58.01 

1893 

1822.39 

17,376,792.11 

10,578,267.90 

593,807.40 

11,172,075.30 

6,204,716.81 

64.26 

1894 

1822.39 

14,739,436.76 

10,107,260.70 

317,098.81 

10,424,359.51 

4,315,077.25 

70.72 

1 1 6 


APPENDIX. 


ii  7 


TABLE  III. 

RELATING  TO  THE  UNION  PACIFIC  RAILWAY  SYSTEM. 

(see  chart  III.) 


• 

Miles 

Operated 

Earnings 

Operating 
Expenses,  not 
Including  Taxes 

Taxes 

Operating  Ex¬ 
penses,  Including 
Taxes 

Surplus 

Earnings 

Exp. 

Ratio, 

Taxes 

Incl’d 

1880 

2766.30 

#25,066,893.77 

#11,581,693.91 

#  540,245-75 

#12,121,939.66 

#12,944,954.11 

48.36 

1881 

3125.45 

28,971,250.27 

15,277,634.82 

562,445.19 

15,840,080.01 

13,131,170.26 

54-67 

1882 

3632.69 

29,430,318.70 

I4,532,384-94 

709,576.44 

15,241,961.38 

14,188,357.32 

51-79 

1883 

4120.65 

28,629,222.80 

15,057,684.15 

1,086,655.66 

16,144,339.81 

12,484,882.99 

56.39 

1884 

4420.30 

25,657,290.41 

14,014,460.40 

853,654.80 

14,868,1 15.20 

10,789,175.21 

57-95 

1885 

4473-95 

25,674,674.75 

I5,083,I75-25 

904,058.28 

l5,987,233-53 

9,687,441.22 

62.27 

1886 

4509.20 

26,280,185.89 

16,359,580.23 

1,052,633.54 

17,412,413.77 

8,867,972.12 

66.26 

1887 

4822.81 

28,557,765.69 

16,616,761.12 

1,050,971.42 

17,667,732.54 

10,890,033.15 

61.87 

1888 

5041.36 

30,195,522.53 

18,476,428.04 

1,258,459.75 

19,734,887.79 

10,460,634.74 

65-36 

1889 

7389-55 

39,669,600.06 

24,516,751.40 

1,496,801.25 

26,013,552.65 

13,656,047.41 

65-58 

1890 

7562.94 

43,049,248.36 

29,343,961.81 

1,467,202.46 

30,811,164.27 

12,238,084.09 

71-57 

1891 

7668.35 

42,699,587.83 

27,668,896.35 

1,491,385.87 

29,160,282.22 

I3,539,305-6l 

68.29 

1892 

7673-59 

43,135,098.20 

27,216,237.23 

1,548,742.17 

28,764,979.40 

I4,370,Il8.80 

66.69 

1893 

I 

7690.57 

36,053,401.68 

24,508,884.96 

1,548,274.16 

26,057,159.12 

9,996,242.56 

72.27 

1  Owing  to  complications  brought  about  by  the  Receivership,  it  was  found  impossible  to 
include  in  the  statements  covering  the  financial  operations  of  the  Union  Pacific  Railway 
System  the  figures  relating  to  certain  lines  which  had  previously  appeared  as  a  part  of  the 
system.  Since  this  change  in  the  basis  of  the  accounts  destroys  their  value  for  comparison 
with  the  figures  of  previous  years,  no  account  of  the  year  1894  is  taken  in  the  charts  and 
tables  relating  to  the  Union  Pacific  Railway  System.  They  are  easily  accessible  to  any  one 
wishing  to  examine  them  in  the  annual  report  of  the  company. 

The  roads  omitted  from  the  accounts  of  1894  are  the  Oregon  Short  Line  &  Utah  Northern 
Railway  Co.;  the  Union  Pacific,  Denver  &  Gulf  Railway  Co.;  the  Union  Pacific,  Lincoln  & 
Colorado  Railway  Co.;  the  St.  Joseph  &  Grand  Island  Railroad  Co.;  and  the  Kansas  City  & 
Omaha  Railroad  Co. 


1 18 


APPENDIX. 


TABLE  IV.’ 


CLASSIFICATION  OF  EARNINGS  OF  THE  UNION  PACIFIC  RAILWAY  COMPANY. 

(see  chart  iv.) 


Passenger 

Freight 

Mail 

Express 

Telegraph 

Miscellaneous 

Total 

1880 

#5,405,125.32 

#15,218,507.49 

#539,870.66 

#68l,8l8.02 

# 

f  430,333.91 

#22,275,655.40 

1881 

5H3L57I.39 

15,559,528.42 

567,875.65 

696,184.12 

646,622.05 

24,105,380.41 

1882 

5,197,730.01 

I3,905,489-63 

632,959.12 

748,932.30 

728,538.95 

22,710,327.75 

1883 

4,659,116.16 

12,939,540.06 

652,215.52 

705,261.96 

630,739.16 

20,915,624.11 

1884 

4,212,597.12 

11,660,310.63 

603,178.60 

655,11346 

1  <j 

705,861.07 

17,837,060.88 

1885 

3,979,899.80 

12,070,749.15 

584,718.69 

514,089.89 

305,573.98 

I7,455,03t.5l 

1886 

4,160,673.82 

12,230,270.56 

587,302.77 

47L778.39 

356,107.05 

17,806,132.59 

1887 

4,620,113.43 

13,436,492.60 

629,061.36 

528,448.03 

331,971.20 

19,546,088.62 

1888 

4,650,535.87 

13,740,293.55 

630,938.23 

482,238.88 

^394,810.40 

19,898,816.93 

1889 

4,324,582.57 

13,509,346.17 

622,918.30 

471,975.21 

#50,172.59 

796,561.00 

19,775,555.84 

1890 

4,224,486.26 

14,287,575.67 

839,927.15 

370,346.20 

63,324.78 

652,548.30 

20,438,208.36 

1891 

3,687,654.01 

13,921,636.43 

1,016,754.85 

348,907.44 

52,493.72 

660,292.03 

19,687,738.48 

1892 

3,648,334.76 

14,558,396.71 

1,041,833.54 

316,962.71 

52,884.48 

742,98946 

20,361,401.66 

1893 

3,459,943-01 

11,780,390.67 

1,064,532.61 

282,951.45 

51,152.41 

737,821.96 

17,376,792.11 

1894 

2,436,613.94 

10,253,679.70 

1,124,732.63 

236,161.55 

48,658.13 

639,590.81 

14,739,436.76 

TABLE  V. 

CLASSIFICATION  OF  EARNINGS  OF  THE  UNION  PACIFIC  RAILWAY  SYSTEM. 


(see  chart  V.) 


Passenger 

Freight 

Mail 

Express 

Telegraph 

Miscellaneous 

Total 

1880 

#6,266,235.69 

'  — 

#25,066,893.77 

l88l 

6,372,958.60 

#18,757,807.54 

28,971,250.27 

1882 

6,828,520.70 

l8,43I,555.05 

#790,361.35 

#893,980.26 

# 

f  868,636.03 

29,430,318.70 

1883 

6,307,497-66 

18,243,858.08 

808,849.72 

863,166.54 

705,250.01 

28,629,222.80 

1884 

6,070,906.95 

17,092,927.39 

852,270.80 

823,693.46 

817,491.81 

25,657,290.41 

1885 

5,755,441.68 

18,004,247.05 

812,612.96 

661,516.53 

1  \ 

440,856.53 

25,674,674.75 

1886 

6,029,733.83 

18,344,549.17 

816,351.07 

657,364.90 

432,186.92 

26,280,185.89 

1887 

6,595,779-54 

19,956,467.00 

879,296.41 

714,055.36 

412,167.38 

28,557,765.69 

1888 

6,997,706.99 

21,077,346.20 

921,841.56 

659,608.28 

.539,0I9.50 

30,195,522.53 

1889 

8,590,324.86 

28,051,716.89 

1,080,883.77 

756,970.48 

#84,110.74 

LI05,593.32 

39,669,600.06 

1890 

9,336,575.58 

30,330,900.11 

1,529,202.75 

692,770.39 

106,309.97 

1,053,489.54 

43,049,248.36 

1891 

8,484,226.68 

30,550,555.29 

1,758,249.83 

674,517.00 

96,952.57 

[,135,086.46 

42,699,587.83 

1892 

8,439,623.61 

31,051,237.60 

L789,395.49 

650,255.74 

99,324.56 

[,105,261.20 

43,135,098.20 

1893 

7,286,617.13 

25,168,689.78 

1,815,772.63 

573,336,55 

93,230.90 

[,115,754.69 

36,053,401.68 

1  Includes  telegraph. 


APPENDIX. 


I  19 


TABLE  VI. 

FIGURES  RELATING  TO  THE  UNION  PACIFIC  RAILWAY  COMPANY’S  FREIGHT 

BUSINESS. 


(see  CHART  VI.) 


Total  Tons  carried  1  Mile 

• 

Rate,  Cents  per 
Ton-Mile 

Revenue 

1880 

1881 

783,331,084 

I.981 

#15,218,507.49 

15,559,528.42 

1882 

732,79L054 

I.89  1 

I3,905,489-63 

1883 

745,989,015 

1  *73  1 

12,939,540.06 

1884 

797,182,908 

1*51 1 

11,660,310.63 

1885 

851,807,292 

1.49 

12,070,749.15 

1886 

966,233,577 

1-443- 

12,230,270.56 

1887 

1,107,931,910 

1.276  — 

13,436,492.60 

1888 

1,216,056,130 

I-I73+ 

13,740,293.55 

1889 

1,159,338,019 

1.165 

13,509,346.17 

1890 

1,248,727,130 

I-I44 

14,287,575.67 

1891 

1,274,102,581 

1.093 

13,921,636.43 

1892 

1,376,906,851 

1-057 

14,558,396.71 

1893 

1,199,214,386 

.982 

11,780,390.67 

1894 

1,042,493,192 

.984 

10,253,679.70 

TABLE  VII. 

FIGURES  RELATING  TO  THE  UNION  PACIFIC  RAILWAY  SYSTEM’S  FREIGHT 

BUSINESS. 


(see  CHART  VII.) 


Total  Tons  carried  1  Mile 

Rate,  Cents  per 
Ton-Mile 

Revenue 

1880 

1881 

839,488,339 

2.23  1 

#18,757,807.54 

1882 

833,381,193 

2.21  1 

l8,43I,555.05 

1883 

890,741,196 

2.05  1 

18,243,858.08 

1884 

984,871,475 

I.801 

17,092,927.39 

1885 

1,109,582,402 

1.72  1 

18,004,247.05 

1886 

1,261,308,798 

I.58l+  1 

18,344,549.17 

1887 

1,490,004,636 

1.422  + 

19,956,467.00 

1888 

1,682,853,857 

1.305- 

21,077,346.20 

1889 

2,057,141,359 

I.363  + 

28,051,716.89 

1890 

2,330,147,013 

1.381 

30,330,900.11 

1891 

2,414,693,606 

1-334 

30,550,555.29 

1892 

2,494,050,611 

1.316 

31,051,237.60 

1893 

2,194,160,485 

1. 214 

25,168,689.78 

1  Includes  coal,  but  excludes  company  freight. 


120 


APPENDIX. 


TABLE  VIII. 

FIGURES  RELATING  TO  THE  UNION  PACIFIC  RAILWAY  COMPANY’S  PAS¬ 
SENGER  BUSINESS. 


(see  chart  viii.) 


Total  No.  Passengers 
carried  1  Mile 

Rate 

Revenue 

1881 

153,570,005 

3-3400 

£5,I3I,57I-39 

1882 

157,527,336 

3.2900 

5,197,730.01 

1883 

148,963,839 

3.1210 

4,659,116.16 

1884 

142,692,631 

2.9034 

4,212,597.12 

1885 

144,800,547 

2.7485 

3,979,899-8o 

1886 

194,870,072 

2.1351 

4,160,673.82 

1887 

200,810,375 

2.3007 

4,620,113.43 

1888 

207,710,322 

2.2389 

4,650,535-87 

1889 

201,741,801 

2.1440 

4,324,582.57 

1890 

204,610,983 

2.0650 

4,224,486.26 

1891 

171,727,025 

2.1470 

3,687,654.01 

1892 

178,983,285 

2.0380 

3,648,334.76 

1893 

177,252,384 

1.9520 

3,459,943-01 

1894 

130,636,277 

1.8650 

2,436,613.94 

TABLE  IX. 

FIGURES  RELATING  TO  THE  UNION  PACIFIC  RAILWAY  SYSTEM’S 

PASSENGER  BUSINESS. 


(see  CHART  IX.) 


Total  No.  Passengers  carried 

1  Mile 

Rate 

Revenue 

1880 

165,645,281 

3-7835 

#6,266,235.69 

1881 

177,143,418 

3.6000 

6,372,958.60 

1882 

191,756,937 

3-5610 

6,828,520.70 

1883 

184,180,603 

3-4250 

6,307,497.66 

1884 

185,721,745 

3.2690 

6,070,906.95 

1885 

189,071,991 

3.0580 

5,755,441.68 

1886 

247,341,275 

2.1350 

6,029,733.83 

1887 

278,381,266 

2.3OIO 

6,595,779-54 

1888 

286,820,182 

2.44OO 

6,997,706.99 

1889 

355,822,732 

2.4140 

8,590,324.86 

1890 

399,664,486 

2.3360 

9,336,575.58 

1891 

342,481,860 

2.4770 

8,484,226.68 

1892 

351,909,299 

2.3980 

8,439,623.61 

1893 

317,631,548 

2.294O 

7,286,617.13 

APPENDIX. 


I  2  I 


TABLE  X. 

FIGURES  RELATING  TO  UNION  PACIFIC  RAILROAD  COMPANY’S  LAND  SALES. 

(see  chart  X.) 


Price 

No.  Pur¬ 
chasers 

Ave.  No. 
A.  to  Each 

Total 

Net  Acreage 

Total  Proceeds 

Expenses 

Net  Proceeds 

To  Jan.  I,  1875 

1875 

1876 

1877 

1878 

1879 

1880 

#4-47 

3.66 

2.98X 

4.98 

4.88X 

4.141 

4.824 

1,082,893.36 

iii,049-55 

125,905.21 

69,015.87 

318,903.47 

243,337-31 

143,483.45 

$  404,462.00 

375,540.82 

343,768.02 

1,557,082.32 

1,007,855.63 

882,656.22 

1,922 

91.68 

$213,309.48 

$669,346.74 

1881 

4-938 

1,075 

89.36 

62,406.09 

571,807.04 

214,893.40 

356,913.64 

1882 

4.28 

2,406 

121.43 

195,248.32 

1,155,694.81 

245,010.92 

910,683.89 

1883 

3-1 1 

2,6o6 

303-03 

8o5,833-54 

2,759,130.64 

232,763.86 

2,526,366.78 

1884 

1.52 

L5I7 

263.60 

4,321,042.98 

6,944,757-17 

345,630.33 

6,599,126.84 

1885 

1.65 

392 

I903.OO 

743,704.18 

I,9l5,963-47 

95,307.67 

1,820,655.80 

1886 

1.22 

26 

5634.62 

146,189.22 

996,413.96 

65,122.23 

93I,29I-73 

1887 

1.44 

125 

4IO.82 

43,297.90 

752,591.43 

9,541.04 

743,050.39 

1888 

3-9i 

77 

240.33 

1 17,225.56 

619,651.00 

3,020.52 

616,630.48 

1889 

2.20 

144 

728.79 

37,987-56 

573,453-29 

1,037,647.69 

’464,194.40 

1890 

1.72 

151 

1084.91 

52,001.14 

472,315.80 

281,095.11 

191,220.69 

1891 

1.83 

141 

667.82 

61,074.52 

346,504.07 

61,068.31 

285,435-76 

1892 

2.50 

164 

999.62 

z3io,  739-44 

’9,992.64 

73,750.79 

2  83,743-43 

1893 

2.88 

133 

666.60 

1  14,535-50 

185,452.35 

19,451.02 

166,001.33 

1894 

2.31 

57 

426.98 

1  32,382.22 

59,926.54 

157,585.65 

’97,659.11 

TABLE  XI. 

TABLE  RELATING  TO  KANSAS  PACIFIC  LAND  SALES. 


(see  CHART  XI.) 


Price 

No.  Pur¬ 
chasers 

Average  No. 
A.  to  Each 

Total  Net 
Acreage 

Total  Proceeds 

Expenses 

Net  Proceeds 

1880 

$4,031 

621 

161.65 

75,187.68 

$410,422.51 

$142,005.19 

$  268,417.32 

l88l 

4.282 

457 

217.68 

76,980.86 

445,958.00 

132,945-39 

313,012.61 

1882 

4-93 

656 

161.46 

63,647-55 

469,923.51 

148,032.65 

321,890.86 

1883 

4-4I5 

1,208 

247.OO 

218,885.71 

1,135,752.47 

187,338.82 

948,4I3-65 

1884 

4.215 

i,396 

234.OO 

452,566.03 

2,076,579.21 

245,029.44 

1,831,549.77 

1885 

4.08 

1,740 

231.OO 

690,294.91 

3,070,831.81 

458,575-47 

2,612,256.34 

1886 

4.68 

644 

357-74 

225,623.21 

1,341,348.09 

83,699.76 

1,257.648.33 

1887 

4-93 

2,017 

259  05 

511,169.77 

2,798,605.26 

160,964.83 

2,637,640.43 

1888 

5-59 

5i6 

298.IO 

121,596.52 

994,703-59 

217,184.79 

777,518.80 

1889 

4-94 

251 

279.79 

59,728.49 

575,265.54 

257,502.21 

317,763.33 

1890 

7.17 

130 

221.26 

17,449-79 

372,905.71 

262,989.44 

109,916.27 

1891 

6.64 

112 

191.00 

2,420.83’ 

384,166.03 

251,718.05 

132,477.98 

1892 

6-37 

3i4 

184.42 

10,654.03’ 

220,083.91 

241,680.46 

21,596.55  3 

1893 

5-52 

216 

262.46 

7,689.42’ 

142,331.13 

186,464.16 

44,133.03’ 

1894 

7-63 

64 

122.38 

4,033-8i 

95,I79.30 

155,840.43 

60,661.13’ 

1  Excess  of  cancellations  over  sales.  2  Deficit. 


122 


APPENDIX. 


TABLE  XII. 

FIGURES  RELATING  TO  UNION  PACIFIC  RAILROAD  COMPANY’S  COAL 

BUSINESS. 

(see  CHART  XII.) 


Tons 

Mined 

Cost 

Per  Ton 

Price 

Per  Ton 

Profit 

Per  Ton 

Net  Earnings 
Coal  Department 

1875 

208,222 

#1.88 

1876 

264,771 

I-4It 

1877 

275,480 

I-I3i 

1878 

275,795 

i-04l 

1879 

340,152 

i.o6f 

1880 

445,129 

1.76 

#1.69 

$-07  1 

#5,978.242 

1881 

587,493 

1.69! 

I-7I* 

•oil 

59,045-07 

1882 

738,210 

-  1 -64! 

1-591 

•0511 

33,402.65  2 

1883 

776,559 

Mi* 

i-53l 

.III 

170,332.44 

1884 

882,608 

i*3il 

1-461 

•14* 

198,592.13 

1885 

817,114 

1.38 

i.5i 

•13 

106,555.02 

1886 

784,587 

1.48 

1.60I 

-I2l 

96,010.35 

1887 

1,009,249 

1.14I 

i-36| 

-22| 

226,451.84 

1888 

1,134,382 

1 • 1 8 1% 

i-33l 

•  1 4xV 

166,419.66 

1889 

1,050,074 

i-59f 

i-54l 

•04! 1 

47,923.622 

1890 

I,268,Il8 

1 -44x11 

i-45l 

.oo* 

75,434-16 

1891 

1,535,045 

1  • 1 7  r3u 

i-35l 

•  l8T^5 

340,758.13 

1892 

1,651,897 

i.09f 

1  -29 1% 

•20t3q 

422,906.01 

1893 

1,505,861 

1. 13  i 

i-35t3tt 

.211 

413,090.01 

1894 

1,299,008 

I-°5x9o 

i-3it9tt 

.26 

421,195.02 

1  Loss. 


2  Deficit. 


TABLE  XIII. 


FIGURES  RELATING  TO  THE  BONDED  INDEBTEDNESS  OF  THE  UNION  PACIFIC  RAILWAY  COMPANY. 


Union  Pacific  Railroad  Company. 

First  Mortgage  Bonds . 

Land  Grant  Bonds . 

Sinking  Fund  Coupon  Bond  s . 

Sinking  Fund  Registered  Bonds . 

Omaha  Bridge  Bonds . 

Collateral  Trust  6  per  cent.  Bonds . 

Kansas  Pacific  Railway  Company. 

Eastern  Division  Bonds . 

Middle  Division  Bonds . 

Denver  Extension  Bonds . 

Leavenworth  Branch  Bonds . 

Consolidated  Mortgage  Bonds . 

Certificates  for  Consolidated  Mortgage  Bonds . 

Income  Bonds . . . 

Income  (subordinated)  Bonds . 

Cheyenne  Branch  Bonds . 

First  Land  Grant  Bonds . 

Second  Land  Grant  Bonds . 

Funding  Bonds . 

Eastern  Division  Coupon  Certificates . 

Middle  Division  Coupon  Certificates . 

Denver  Extension  Coupon  Certificates . 

Leavenworth  Branch  Coupon  Certificates . 

First  Land  Grant  Coupon  Certificates . 

Second  Land  Grant  Coupon  Certificates . 

Denver  Pacific  Railway  and  Telegraph . 

Union  Pacific  Railway  Company. 

Trust  5  per  cent.  Bonds . 

Trust  5  per  cent.  Bonds,  registered . 

Omaha  Bridge  Renewal  Bonds . 

Equipment  Trust  Bonds,  Series  A . 

Equipment  Trust  Bonds,  Series  B . 

Equipment  Trust  per  cent.  Bonds,  Series  C 

Collateral  Trust  4^  per  cent.  Bonds . 

Collateral  Trust  6  per  cent.  Notes . 


1880 

1881 

1882 

1883 

1884 

1885 

1886 

1887 

1888 

1889 

1890 

1891 

1892 

1893 

1894 

$27,229,000.00 

6,071,000.00 

13,124,000.00 

737,000.00 

2,037,000.00 

4,691,000.00 

$27,229,000.00 

5,384,000.00 

12,715,000.00 

1,146,000.00 

1,960,000.00 

5,060,000.00 

$27,229,000.00 

4,670,000.00 

12,613,000.00 

1,248,000.00 

1,888,000.00 

4,918,000.00 

827,229,000.00 

4,589,000.00 

12,115,000.00 

1,746,000.00 

1,805,000.00 

4,788,000.00 

$27,229,000 

3,360,000 

12,703,000 

1,918,000 

1,716,000 

4,662,000 

$27,229,000.00 

2,706,000.00 

12,554,000.00 

1,929,000.00 

1,621,000.00 

4,541,000.00 

$27,229,000.00 

2,056,000.00 

12,377,000.00 

1,971,000.00 

1,519,000.00 

4,423,000.00 

$27,229,000 

1,130,000 

12,224,000 

1,993,000 

1,410,000 

4,309,000 

$27,229,000 

624,000 

1 1,789,000 
2,426,000 
1,293,000 
4,197,000 

827,229,000 

10,000 

8,286,000 

5,817,000 

1,167,000 

4,088,000 

$27,229,000 

10,000 

5,917,000 

673,000 

1,032,000 

3,983,00c 

827,229,000 

9,000 

5,427,000 

608,000 

882,000 

3,879,000 

$27,229,000 

8,000 

4,721,000 

455,000 

728,000 

3,775,000 

$27,229,000 

7,000 

3,507,000 

275,000 

561,000 

3,658,000 

827,229,000 

7,000 

3,475,000 

272,000 

382,000 

3,672,000 

2,240,000.00 

4,063,000.00 

6,366,000.00 

600,000.00 

12,602,000.00 

2,240,000.00 

4,063,000.00 

6,366,000.00 

100,000.00 

14,450,005.00 

2,240,000.00 

4,063,000.00 

6,323,000.00 

67,000.00 

15,640,005.00 

2,240,000.00 
4,063,000.00 
6,307,000.00 
35,000.00 
15, 775»oo5.oo 

2,240,000 

4,063,000 

6,279,000 

32,000 

15,927,005 

2,240,000.00 

4,063,000.00 

6,258,000.00 

18,000.00 

14,905,005.00 

2,240,000.00 

4,063,000.00 

6,242,000.00 

18,000.00 

14,855,000.00 

2,240,000 

4,063,000 

6,131,000 

18,000 

13,655,000 

2,240,000 

4,063,000 

6,037,000 

18,000 

13,038,000 

2,240,000 

4,063,000 

6,014,000 

18,000 

12,871,000 

2,240,000 

4,063,000 

5,887,000 

18,000 

12,570,000 

2,240,000 

4,063,000 

5,886,000 

18,000 

12,470,000 

2,240,000 

4,063,000 

5,887,000 

15,000 

11,720,000 

2,240,000 

4,063,000 

5,887,000 

15,000 

1 1,720,000 

2,240,000 

4,063,000 

5,887,000 

15,000 

11,720,000 

263,700.00 

4,011,650.00 

76,050.00 

975,250.00 

76,050.00 

806,350.00 

47,000.00 

48,350.00 

715,750.00 

43,000.00 

48,350 

260,050 

11,000 

45.950.00 

63,250.00 

8,000.00 

45,950.00 

63,250.00 

8,000.00 

45.950 

63.250 

8,000 

45.950 

63,250 

8,000 

45,950 

63,250 

8,000 

22,500 

19,000 

4,000 

21,250 

19,000 

4,000 

21,250 

14,550 

4,000 

9,850 

20,550 

4,000 

9,850 

20,550 

4,000 

1,480,750.00 

161,595.00 

1,500,000.00 

297,780.00 

541,050.00 

1,000,895.00 

52,500.00 

1,000.00 

1,000.00 

540.00 

3,645.00 

126,402.50 

405.00 

4,567.50 

2,397-50 

1.365 

962.50 

385.00 

385 

385 

70 

385 

385 

385 

385 

92,417.50 

36,067.50 

2,91375 

1,575.00 

82,000.00 

9,870.00 

1,260.05 

4,830.00 

4.515 

4,515.00 

542-50 

70 

246,765.12 

161,595.00 

2,127,000.00 

2,980,000.00 

20,000.00 

3,704,000 

15,000 

3,707,000.00 

64,000.00 

4,552,000.00 

15,000.00 

291,000.00 

5,432,000 

18,000 

211,000 

5,299,000 

18,000 

328,000 

645,000 

1,098,000 

5,173,000 

18,000 

454,000 

573,000 

1,894,000 

2,058,000 

5,054,000 

18,000 

589,000 

502,000 

1,684,000 

389,000 

2,065,000 

4,921,000 

18,000 

589,000 

430,000 

1,473,000 

4,790,000 

18,000 

589,000 

358,000 

1,263,000 

4,660,000 

17,000 

589,000 

287,000 

1,052,000 

4,660,000 

17,000 

589,000 

287,000 

1,052,000 

1,814,000 

18,293,000 

1,800,000 

1,793,000 

1,793,000 

IS,793,°o° 

592,984,624.72 

882,070,948.75 

*81,845,507.55 

884,506,332.50 

884,173,285 

881,957,682.50 

881,969,127.50 

880,180,655 

880,459,000 

880,090,585 

873,968,885 

890,293,635 

885,492,185 

878,469,785 

878,231,785 

Total 


. . .  .  ...... 


APPENDIX. 


123 


TABLE  XIV. 

CLASSIFICATION  OF  EARNINGS  OF  THE  UNION  PACIFIC  RAILROAD  COMPANY. 


Passenger 

Freight 

Mail 

Express 

Miscellaneous 

1870 

$3,818,627.55 

#3,058,514-71 

#274,5I3.58 

$281,691.76 

$191,929.53 

1871 

4,123,510.08 

3,629,488.94 

283,748.80 

307,731.32 

177,203.02 

1872 

3,370,312.41 

4,768,419.07 

283,855.00 

336,333-35 

133,685.70 

1873 

3,887,204.48 

5,516,907.58 

283,855.00 

410,190.76 

167,945.84 

1874 

3,952,858.55 

5,664,731.33 

345,758.00 

381,303.77 

215,228.47 

1875 

4,346,014.34 

6,641,512.27 

325,143.00 

444,174.23 

236,988.25 

1876 

4,307,602.53 

7,304,123.50 

574,139.00 

502,738.42 

198,255.39 

1877 

3,599,756.87 

7,597,680.53 

596,775.00 

430,791.98 

248,199.48 

1878 

3,190,369.72 

8,500,95576 

596,775.00 

491,145.79 

342,026.31 

1879 

3,207,909.92 

8,692,414.24 

596,775.00 

360,840.90 

343,137.60 

TABLE  XV. 

EARNINGS  AND  EXPENSES  OF  THE  UNION  PACIFIC  RAILROAD  COMPANY. 


EARNINGS. 

1878 

1879 

1880 

Passengers — Cash . 

Passengers — Government . 

Freight — Cash . 

Freight — Government . 

Freight — Company . 

Mail . 

Express . 

Miscellaneous . 

$  2,926,543.73 
223,865.11 
7,200,556.52 
294,414.10 
800,907.27 
596,775.00 

488.645.92 

589.564.93 

$  4,236,869.71 
169,927.63 
10,572,805.11 

443,435-46 

1,051,154.69 

685,712.70 

496,218.28 

384,142.50 

$  5,171,114.97 
234,010.35 
13,406,910.18 
469,025.04 
1,342,572.27 
719,349.84 
681,818.02 
430,331.91 

Total . 

$13,121,272.58 

$18,040,226.08 

$22,455,134.58 

EXPENSES. 

Conducting  Transportation . 

Motive  Power . 

Maintenance  of  Cars . 

Maintenance  of  Way . 

Renewal  of  Rails . 

General  Expenses . 

Taxes . 

$  912,161.57 
1,693,721.54 
443,760.66 
1,513,005.48 

607,537.40 

206,399.54 

#i,555,833-38 

2,706,055.53 

639,091.10 

i,7oi,535-55 

816,853.62 

910,709.61 

438,758.17 

$  2,132,692.47 

3,583,453-72 

841,417.08 

1,964,772.72 

1,109,676.57 

473.198.98 

439.907.98 

Total . 

5,475,503-44 

8,368,836.96 

10,545,119.52 

Surplus  Earnings . 

$7,744,686.39 

$9,671,429.12 

$1 1,910,015.06 

Expenses,  ratio  per  cent . 

40.98 

46.38 

46.96 

EARNINGS  AND  EXPENSES  OF  THE  UNION  PACIFIC  RAILROAD  COMPANY. 


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• 

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<V 

Total  . . . . 

q 

•  |H 

s 

'f- 

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a 

C/3 

ense  Ratio 

s 

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0 

> 

~ 

•  r-« 

a. 

U 

in 

C 

q 

H-k 

<v 

a 

a.  a 

a 

q 

q 

£ 

a 

a 

q 

X 

a 

a 

O 

O 

o 

o 

c 

S3 

X 

a 

<v 

U 

o 

o 

p 

<u 

<D 

V 

(U 

OJ 

OJ 

d 

OJ 

OJ 

<u 

d 

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X 

u 

o 

U 

O 

U 

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% 

PQ 

V 

Ph 

H-H 

V 

H-H 

pi 

Pi 

<3 

X 

ry/ 

pi 

O 

C/2 

a 

1  Amount  expended  in  excess  of  receipts  for  car  service. 


TABLE  XVII. 

EXPENSES  OF  THE  UNION  PACIFIC  RAILWAY  COMPANY. 


1880 1 

1881 

1882 

1883 

I884 

1885 

1886 

1887 

1888 

1889 

1890 

1891 

1892 

1893 

1894 

Conducting  Transportation . 

Motive  Power . . 

Maintenance  of  Cars . 

Maintenance  of  Way . 

Renewal  of  Rails . 

General  Expenses . 

$  2,I34,357.59 
3,583,453.72 
839,751.96 
3,074,449.29 

$  2,482,587.56 
4,073,043.i9 
1,112,862.52 
3,879,497.32 

$  2,392,498.72 
3,775,888.47 
957,943-44 
2,638,635.14 

$  2,596,230.38 
3,778,344-59 
848,062.73 
1,845,961.85 
249,115.28 
531,684.87 

$  2,772,468.26 
2,868,119.66 
738,474.35 
1,498,771-83 
196,275.46 
350,815.67 

$  2,791,857.68 
2,804,346.42 
799,454.42 
1,557,022.65 
212,004.85 
395,935.22 

$  3,064,927.10 
3,099,757.I7 
960,847.09 
1,963,076.98 
286,436.46 
310,726.32 

$  3,294,699.94 
3,410,503.81 
1,022,950.42 
1,531,245,89 
106,091.44 
504,124.33 

$  3,577,685.70 
3,943,660.07 
1,269,061.47 
1,590,468.01 
228,174.11 

503,097-31 

$  3,693,630.26 
3,785,997.2i 
1,350,092.05 
1,512,885.74 
134,160.80 
401,593.72 

$  4,506,648.91 
4,210,849.95 
1,598,184.71 
1,586,535-53 
232,182.39 
439,418.94 

$  4,051,868.98 
3,710,851.15 
1,560,151.59 

1,525,843-17 

37,774.13 

404,039.16 

$  4,177,621.22 
3,634,589.43 
1,485,566.87 
1,416,382.81 
196,170.73 
346,291.80 

$  3,858,808.59 
3,542,536.94 
1,370,119.07 
1,314,316.23 
134,436.82 
358,050.25 

$  3,278,335.I5 
3,512,985.37 
1,140,106.16 
1,410,482.91 
374,523.77 
390,827.34 

Total  Expenses  ("Paxes  cAcludcd j ,  , , , , 

$  8,424,925.23 

$  8,560,621.24 

$  9,685,771.12 

$  9,869,615.83 

$11,112,146.67 

$10,878,359.78 

$12,573,820.43 

$11,290,528.18 

$11,256,622.86 

$10,578,267.90 

$10,107,260.70 

Surplus  Earnings  (Taxes  deducted). . . 

489,733.96 

597,654-45 

564,585.94 

$  8,786,670.26 
667,202.10 

$  8,897,196.06 
610,516.43 

$  7,864,387.93 
589,628.87 

$  8,397,210.30 
550,758.60 

$  9,104,778.80 
554,510.58 

$  6,798,524.21 
593,807.40 

$  4,623,176.06 

3I7.OQ8. 8l 

$11,910,015.06 

$11,778,474-39 

$12,096,834.96 

$10,648,001.28 

$  8,941,909.41 

$  8,404,676.31 

$  7,552,707-02 

$  9,111,886.85 

$  8,119,468.16 

$  8,286,679.63 

$  7,274,759.o6 

$  7,846,451.70 

$  8,550,268.22 

$  6,204,716.81 

$  4,315,077.25 

Expense  Ratio  (including  Taxes) . 

Expense  Ratio  (including  Taxes) . 

$1,820.90 

46.96 

$1,820.90 

51.45 

$1,820.90 

47.00 

$1,820.90 

49-30 

$1,831.90 

49.87 

47-23 

$1,8*32.45 

51-85 

49.04 

$1,832.45 

57-75 

54-40 

$1,824.06 

53-38 

50.49 

$1,821.43 

59.20 

55.84 

$1,821.36 

58.10 

55.01 

$1,821.42 

64.41 

61.52 

$1,821.86 

60.15 

57-35 

$1,821.86 

58.01 

55-29 

$1,822.39 

64.29 

60.88 

$1,822.59 

70.71 

68.57 

J.  I iUL- -I—.  A  V  ill. 


EXPENSES  OF  THE  UNION  PACIFIC  RAILWAY  SYSTEM. 


Conducting  Transportation 

Motive  Power . 

Maintenance  of  Cars . 

Maintenance  of  Way . 

Renewal  of  Rails . 

General  Expenses . 


1880* 


Total  Expenses  (Taxes  excluded). . . 

Surplus . 

Taxes . 

Surplus  Earnings  (Taxes  deducted) . 

Miles  Operated  (average) . 

Expense  Ratio  (including  Taxes) .  . . 
Expense  Ratio  (excluding  Taxes) .  . . 


$  2,484,491.90 
4,072,993.65 
935,343.58 

3,584,381-17 


,$13,124,433.29 


$2,766.30 


1881 


3,132,367-34 

5,181,760.55 

1,420,468.82 

4,931,266.95 


$13,284,606.95 


$3,125.45 


1882 


3,292,571.17 

5,225,352.21 

1,434,656.85 

4,030,827.51 


$14,301,913.81 


$3,632.59 


1883 


3,736,138.14 

5,712,774-80 

1,245,125.21 

3,332,008.80 

399,861.27 

631,775-93 


841,717.64 


$12,816,738.68 


1884 


4,156,168.85 

5,009,270.83 

1,131,285.97 

3,069,508.58 

248,722.79 

399,503.38 


853,654.80 


.,120.65 


$10,789,175.21 


1,420.30 

57-95 


1  Statement  for  January  not  included. 


1885 


4,499,818.18 

5,364,600.58 

1,203,871.61 

3,210,539.06 

323,616.86 

480,728.96 


904,058.28 


$  9,687,441.22 

1,473-95 

62.27 


1886 


4,871,101.01 

5,352,368.54 

1,426,861.56 

3,745,635-74 

590,860.76 

372,752.62 


1,052,633.54 


$  8,867,972.12 

1,509.20 
66.26 


1887 


5,156,531.94 

5,913,282.84 

1,490,709.62 

3,146,948.12 

256,551-56 

652,737-04 


1,231,420.36 


$10,890,033.15 

1,622.81 
61.87 


1888 


$  5,620,244.94 
6,597,424.58 
1,772,765.88 
3,427,586.79 
404,705.36 

653,700.49 


$18,476,428.04 


1889 


$  7,876,075.25 
8,688,618.89 

2,357,295-89 

4,552,778.27 

243,541-59 

798,441.51 


1890 


11,719,094.49 

1,258,459.75 


$10,460,634.74 

$5,041-36 
65.36 
61.19 


$24,516,751.40 


$29,343,69i.8i 


115,152,848.66 

1,496,801.25 


$13,656,047.41 


$7,389-55 

65.58 

61.80 


$  9,781,679.50 
10,210,675.41 
2,884,756.74 
5,049,190.88 
551,655-72 

866,003.56 


113,705,286.55 

1,467,202.46 


$12,238,084.09 


1891 


$  9,129,102.68 
9,467,518.34 
2,873,264.91 
5,267,670.86 
181,564.58 
740,774.98 


$27,668,896.35 


$15,030,691.48 

1,491,381.87 


$i3,539,309.6i 


$7,562.49 

71.57 

68.16 


$7,668.35 

68.29 

64.80 


1892 


$  9,313,278.56 
9,242,457.28 
2,690,270.91 
4,941,036.76 
371,458.41 
657,735.3i 


$27,216,237.23 


$15,918,860.97 

1,548,742.17 


$14,370,118.80 


$7,673-59 

66.69 

63.10 


1893 


8,337,554-82 

8,265,916.95 

2,418,282.92 

4,506,679.71 

326,327.45 

654,123.21 


$24,508,884.96 


$11,544,516.72 

1,548,274.16 


$  9,996,242.56 


$7,690.57 

72.27 

67.98 


'  t  •  4  •  4 


•  '  •  *  »  *  - 


<  •  •  » 


-  •  ‘  .  . 


INDEX. 


Adams,  Charles  Francis,  becomes  presi¬ 
dent  of  the  Union  Pacific  Railway  Co.; 
letter  in  the  Boston  Advertiser,  61 ; 
offers  to  settle  with  Government,  96. 

Affairs  of  the  Union  Pacific  Railroad  Co., 
17- 

Alley,  John  B.,  one  of  the  seven  trustees, 
31- 

Amendments  to  Act  of  1862,  15. 

Ames,  Frederick  L.,  holdings  of  Union 
Pacific  and  Kansas  Pacific  stock  in 
1880,  60;  estate  of,  and  receivership, 
98. 

Ames,  Oakes,  member  of  House  Com¬ 
mittee  on  Railroads,  20 ;  contract,  30  ; 
and  Sioux  City  and  Pacific,  38 ;  testi¬ 
mony  concerning,  before  Wilson  and 
Poland  Committees,  77;  ieport  and 
recommendations  of  Poland  Committee 
concerning,  78. 

Ames,  Oliver,  becomes  interested  in  Union 
Pacific,  20 ;  director  of  Union  Pacific, 
24;  one  of  the  seven  trustees,  31  ;  and 
Central  Branch,  51. 

Anderson,  E.  Ellery,  receiver,  98. 

Arbitrary,  65. 

Atchison  and  Denver  Railroad,  51. 

Atchison  and  Pike’s  Peak  Railroad,  48. 

Atchison,  Colorado  and  Pacific  Railroad, 
5i- 

Atchison,  Jewell  County  and  Western 
Railroad,  51. 

Atchison,  Republican  Valley  and  Pacific 
Railroad,  51. 

Atchison,  Solomon  Valley  and  Denver 
Railway,  51. 

Atchison,  Topeka  and  Santa  Fe,  61,  93. 

Atkins,  Elisha,  holdings  of  Union  Pacific 
and  Kansas  Pacific  stock  in  1880,  60. 


Baker,  E.  H.,  holdings  of  Union  Pacific 
and  Kansas  Pacific  stock  in  1880,  60. 

Bates,  Benjamin  E.,  one  of  the  seven 
trustees,  31. 

Belmont,  August,  18. 

Black  Hills,  route  found  by  way  of,  29. 

Blair,  John  I.,  38. 

Blame  for  excessive  cost  of  Union  Pacific, 
34- 

Bond  subsidy,  $ 61,000,000 ,  15. 

Boomer,  L.  B.,  of  Chicago,  and  contract, 
24- 

Breeze,  Senator,  introduces  bill  to  carry 
out  Whitney’s  plan,  3. 

Brice,  Calvin  S.,  98. 

Bright,  Senator,  and  committee  report,  8. 

Brooks,  James,  78. 

Burnetizing  ties,  20. 

Bushnell,  C.  S.,  of  New  Haven,  18,  21  ; 
purchases  a  construction  company 
charter,  21 ;  sale  of  securities  by,  27 ; 
one  of  the  seven  trustees,  31. 

Butler,  General  Benjamin  F.,  and  tripartite 
agreement,  31. 

Calhoun,  John  C.,  favorable  to  project,  8. 

Capital  back  of  the  seven  trustees,  32. 

Capitalization  of  Union  Pacific  Railroad 
Co.,  35. 

Capital  of  Union  Pacific  Railway  Co.  in 
1880,  59. 

Cars  and  materials  of  Union  Pacific  sold 
to  raise  funds,  18. 

Carver,  Captain  Jonathan,  1. 

Central  Branch  Union  Pacific,  history  of, 

48-52. 

Central  Pacific,  9. 

Central  Pacific  Railroad  Co.  of  California 
13;  organized  in  1861,  17;  outline  of 
history  of,  38-9. 


125 


126 


INDEX. 


Chart  showing  contracts  for  building 
Union  Pacific,  33. 

Chase,  Salmon  P.,  author  of  first  measure 
to  aid  Pacific  railway,  8. 

Cheyenne  Pass,  29. 

Chicago  and  Northwestern  Railway 
reaches  Omaha,  13;  controls  Sioux 
City  and  Pacific,  38. 

Chicago,  Burlington  and  Quincy,  51. 

Chicago,  Rock  Island  and  Pacific,  51. 

Cisco,  J.  J.,  of  New  York,  Treasurer  of 
Union  Pacific  Railroad  Co.,  18. 

Clark,  S.  H.  H.,  receiver  of  Union  Pacific, 
98. 

Clarke,  Horace  F.,  opinion  of  Ames  con¬ 
tract,  31 ;  buys  Union  Pacific  stock,  55  ; 
death  and  sale  of  stock,  55. 

Clarke,  Lewis  and,  expedition,  2. 

Coal  business  of  Union  Pacific  Railroad 
Co.,  90. 

Comparison  of  values  of  Union  Pacific 
and  Kansas  Pacific,  56. 

Completion  of  road,  74. 

Consolidation  of  1880,  59;  effect,  and 
profit  to  directors  of  Union  Pacific  and 
Kansas  Pacific,  60. 

Construction  companies,  21 ;  of  Central 
Pacific,  39  ;  defined,  54. 

Constructive  mileage,  64. 

Contract  and  Finance  Company,  39. 

Contracts  for  building  Union  Pacific  pro¬ 
posed  but  not  executed,  24-29. 

Cost  of  building  Union  Pacific  first 
sections  heavy,  18;  increased  by  what, 
34 ;  total,  36. 

Cost  of  railway  building  in  various  states, 

17. 

Cost  of  wagon  transportation  of  freight, 
71. 

Coudert,  Frederick  R.,  receiver,  98. 

Crane,  H.  C.,  Hoxie’s  attorney,  director, 
etc.,  19. 

Credit  Mobilier  Investigation,  19. 

Credit  Mobilier  of  America,  first  con¬ 
nection  with  Union  Pacific,  21  ;  rail¬ 
way  bureau,  22 ;  objects  in  securing, 
22  ;  executive  committee,  22  ;  capital, 


22,  23 ;  nature  of  charter,  23 ;  capital 
stock  increased,  27  ;  value  of  stock,  32  ; 
first  attack  on,  in  Congress,  73 ;  in 
campaign  of  1872,  76;  claims  against 
Union  Pacific  and  end  of  its  history,  80. 

Cuts  in  Laramie  Plans,  34. 

Crocker,  Charles,  38. 

Davis,  James  W.,  contract  and  its  assign¬ 
ment,  32. 

Davis,  Jefferson,  favorable  to  Pacific  rail¬ 
way  project,  8. 

Davis,  John  P.,  author  of  the  Union 
Pacific  Railway,  1 1 . 

Delaware  Indian  Lands,  39. 

Denver  and  Rio  Grande,  61. 

Denver  Extension,  42. 

Denver  Pacific  Railroad  Co.,  chartered, 
41 ;  history  of,  45-6. 

Dexter,  F.  Gordon,  holdings  of  Union 
Pacific  and  Kansas  Pacific  stock  in 
1880,  60. 

Dey,  Peter  A.,  70. 

Difficulty  of  settlement  between  Govern¬ 
ment  and  Pacific  railways,  94. 

Dillon,  Sidneyj  became  stockholder  of 
Union  Pacific,  23;  one  of  the  seven 
trustees,  31 ;  holdings  in  Union  Pacific 
and  Kansas  Pacific  stock  in  1880,  60; 
proposal  for  payment  of  Union  Pacific 
debt  to  Government,  95. 

Directors  of  Union  Pacific,  first  board  of, 

18. 

Dix,  General  John  A.,  of  New  York,  first 
President  of  Union  Pacific,  18. 

Doane,  J.  W.,  receiver  of  Union  Pacific, 
98. 

Dodge,  General  G.  M.,  and  finding  of 
Evans  Pass,  29 ;  proposal  for  payment 
of  Union  Pacific  debt  to  Government, 
94. 

Douglas,  Stephen  A.,  favorable  to  Pacific 
railway  project,  8. 

Duff,  John,  Union  Pacific  stockholder,  23; 
attempts  to  let  contracts,  30. 

Durant,  Thomas  C.,  of  New  York,  takes 
hold  of  Union  Pacific  project,  17;  re¬ 
sponsible  for  three  -  fourths  of  first 


INDEX. 


127 


$2,000,000  of  stock-subscriptions,  19; 
prevents  contract-letting  by  injunctions, 
26,  28 ;  one  of  seven  trustees,  31. 

“Eminent  citizens,”  commission  of,  73; 
expenditures  demanded  by,  74. 

Evans  Pass,  manner  of  finding,  29. 

Evans,  John,  and  Denver  Pacific,  45. 

Exhaustive  contracts,  21. 

Expenditures  of  Union  Pacific,  study  of, 
92-3- 

Factions,  Ames  and  Durant,  24. 

Feeders,  policy  of  building,  62-4  ;  expend¬ 
itures  on,  66-7. 

Fessenden,  Senator,  of  Maine,  50. 

First  appropriation  for  Pacific  railway,  8. 

First  definite  plan  for  a  Pacific  railway,  3. 

First  president  of  Union  Pacific  Railroad 
Co,,  18. 

First  public  meeting  to  advocate  a  Pacific 
railway,  2. 

First  railway  to  Omaha,  13. 

Fisk,  James,  55. 

Freight  earnings,  tonnage,  rates,  on  Union 
Pacific  Railway  Co.,  1880-94,  90 ;  on 
Union  Pacific  Railway  System,  1880- 
93,  90. 

Fremont,  John  C.,  and  his  travels,  2  ;  pur¬ 
chase  of  Leavenworth,  Pawnee  and 
Western,  40. 

Funded  debt,  93. 

Garrison,  Commodore,  negotiations  with, 
concerning  purchase  of  Central  Branch, 
51 ;  sells  Missouri  Pacific  road  to 
Gould,  58. 

Gessner  contract,  see  Boomer  contract, 
24. 

Gould,  Jay,  and  Kansas  Pacific,  46  ;  and 
Central  Branch,  51-2;  buys  Union 
Pacific  stock,  55  ;  sells  it,  56;  his  pro¬ 
posed  road  from  St.  Louis  to  Ogden,  59  ; 
his  holdings  of  Union  Pacific  and  Kan¬ 
sas  Pacific  stock  in  1880,  60;  second 
regime,  67  ;  and  Credit  Mobilier  claims 
against  Union  Pacific,  80;  offers  to  pay 
Union  Pacific  debt  to  Government,  94, 
96. 


Hallett,  Samuel,  purchase  of  Leavenworth, 
Pawnee  and  Western,  40. 

Ham,  Benjamin  F.,  Assistant  Secretary 
and  Treasurer  of  Credit  Mobilier,  36. 

Hannibal  and  St.  Joseph  Railroad,  48. 

Haste  in  building  Union  Pacific,  reasons 
for,  increase  of  cost  due  to,  33. 

Hoar  bill,  96. 

Hopkins,  Mark,  38. 

Horn  silver  mines,  61. 

Hoxie,  H.  M.,  contract,  proposed  exten¬ 
sion,  19;  assignment,  20  ;  extension,  25. 

Huntington,  Collis  P.,  38  ;  offers  to  pay 
Central  Pacific  debt  to  Government,  96. 

Income  of  Union  Pacific  Railroad  Co., 
1870-9,  85  ;  Union  Pacific  Railway  Co., 
1880-94,  87,  89  ;  Union  Pacific  Railway 
System,  1880-93,  88,  89. 

Indians,  workmen  killed  by,  34. 

Injunctions,  Durant’s,  to  prevent  making 
contracts,  26,  28. 

Interest  paid  by  Union  Pacific,  27,  28,  34. 

Interest  on  subsidy  bonds,  due  when,  74. 

Joining  of  Union  Pacific  and  Central  Pa¬ 
cific,  33. 

Judiciary  Committee  of  House  and  Poland 
Committee  report,  79. 

Kansas  branch,  see  Kansas  Pacific. 

Kansas  City  branch,  see  Kansas  Pacific. 

Kansas  Pacific,  history  of,  38-48 ;  plan 
for  competing  road  instead  of  branch  of 
Union  Pacific,  41  ;  cost  of,  42  ;  quarrels 
with  Union  Pacific,  46  ;  pool  agreement, 
47  ;  consolidated  mortgage,  47  ;  land 
grant,  91. 

Lambard,  Charles  A.,  of  Boston,  18,  20. 

Land  grant,  of  Union  Pacific  and  of  Kan¬ 
sas  Pacific,  91. 

Land  subsidy,  33,000,000  acres,  14. 

Leavenworth  branch,  14. 

Leavenworth,  Pawnee  and  Western,  14; 
charter,  39. 

Lewis  and  Clarke  expedition,  2. 

Lincoln,  President,  signs  Pacific  Railway 
Act  of  1862,  12. 


128 


INDEX. 


McComb,  H.  S.,  1 8,  20;  one  of  the  seven 
trustees,  31. 

Machine  shops,  34. 

Map  of  proposed  Pacific  railways,  14. 

Map  of  Pacific  railways,  as  built,  53. 

Materials  and  cars  of  Union  Pacific  sold, 
18. 

Memorials  to  Congress,  Whitney’s,  3. 

Mink,  Oliver  W.,  98. 

Missouri  Pacific,  58. 

Mortgage  on  roads,  first,  15;  second,  16. 

Motives  for  building  Pacific  railway,  1. 

Net  earnings,  Union  Pacific  Railroad  Co., 
1870-9,  85  ;  Union  Pacific  Railway  Co., 
1880-94,87;  Union  Pacific  Railway 
System,  1880-93,  88. 

Northern  Pacific,  9,  61. 

Offer  to  pay  debt  to  Government,  Gould’s, 
94  ;  Dillon’s,  95  ;  Pluntington’s,  96  ; 
Adam’s,  96. 

Officers  of  Union  Pacific,  first,  18. 

Olney’s  plans  for  settlement  of  the  debt, 
97- 

Omaha’s  first  railway  connection  with  the 
East,  13. 

Operating  expenses,  Union  Pacific  Rail¬ 
road  Co.,  1870-9,  85;  Union  Pacific 
Railway  Co.,  1880-94,  87;  Union 
Pacific  Railway  System,  1880-93,  88. 

Oregon  Railway  and  Navigation  Co.,  66. 

Oregon  Short  Line,  66. 

Organization  of  Central  Pacific  Railroad 
Co..  17. 

Organization  of  Union  Pacific  Railroad 
Co.,  15. 

Osborn,  William,  contract,  49. 

Pacific  Railway  Act  of  1862,  passage,  12  ; 
object,  13;  terms,  13-15;  amendments, 
15- 

Pacific  Railway  Act  of  1864,  16,  19. 

Pacific  railway  and  the  Indian  problem, 
saving  on  Government  expenses,  a  war 
measure,  71. 

Pacific  railway  bills,  early,  9-12. 

Pacific  Railway  Commission  of  1887,  84. 


Pacific  railway,  expectations  of  profits 
from,  69  ;  opposite  view,  69. 

Pacific  railway  in  party  platforms,  10. 

Pacific  railway  subsidy,  14. 

Pacific  Railway,  map  of,  as  proposed,  14; 
as  built,  53. 

Palmer,  President  of  Chicago,  Rock 
Island  and  Pacific,  51. 

Party  platforms  and  the  Pacific  railway, 
10. 

Passenger  earnings,  numbers,  rates,  on 
Union  Pacific  Railway  Co.,  1880-94, 
90 ;  Union  Pacific  Railway  System, 
1880-93,  9°- 

Pennsylvania  Fiscal  Agency,  objects, 
charter,  bought  by  Durant,  name 
changed  to  Credit  Mobilier,  21. 

Perry,  John  D.,  and  Co.,  42. 

Plans  for  settlement  with  Government, 
Thurman’s,  82-3  ;  Hoar’s,  96 ;  Olney’s, 
97- 

Platforms  of  parties  and  Pacific  railway, 
10. 

Plumbe,  John,  2. 

Poland,  Luke,  chairman  of  House  Com¬ 
mittee,  19,  76;  committee  report  and 
Judiciary  Committee  of  House,  79. 

Pomeroy,  S.  C.,  of  Atchison,  Kansas,  18. 

Poor,  H.  V.,  of  New  York,  first  secretary 
of  Union  Pacific  Railroad  Co.,  18. 

Pottawatamie  Indian  lands,  39. 

Profit  on  construction  of  Union  Pacific, 
cash,  36 ;  cash  and  stock,  37. 

Proposed  routes  for  Pacific  railways,  9-10. 

Prorate,  64. 

Rate  prorate,  65. 

Receipts  from  sale  of  securities,  36. 

Receivers,  names,  98. 

Receivership  of  Union  Pacific,  67. 

Reorganization  Committee  of  stock¬ 
holders,  98. 

Republican  Valley  Railroad,  51. 

Resolution  for  appointing  board  of  “emi¬ 
nent  citizens,”  73. 

Sage,  Russell,  holdings  of  Union  Pacific 
and  Kansas  Pacific  stock  in  1880,  60. 

St.  Joseph,  initial  point  of  branch,  14. 


INDEX. 


129 


Scranton,  Joseph  H.,  of  Scranton,  Pa., 
18. 

Settlement  with  Government,  why  diffi¬ 
cult,  94. 

Shoemaker,  R.  M.  and  Co.,  42. 

Shoemaker,  Miller  and  Co.,  42. 

Sioux  City  Branch,  see  Sioux  City  and 
Pacific. 

Sioux  City  and  Pacific,  13,  38. 

Southern  Pacific,  9,  39,  61. 

Stanford,  Leland,  38. 

Stock  subscription  to  Union  Pacific,  17, 
18. 

Subsidy  of  Pacific  railway,  14. 

Surveys  of  routes  for  Pacific  railway,  8. 

Terms  of  Pacific  railway  bills,  10-12. 

Thompson,  J.  Edgar,  of  Philadelphia,  18. 

Thurman  Act,  provisions,  80-2  ;  legality, 
82-3 ;  workings,  83 ;  a  type  of  Govern¬ 
ment’s  proposals  for  settling  the  debts, 
96. 

Transportation  of  materials  for  Pacific 
railways,  17. 

Trent  affair,  72. 

Tripartite  agreement,  31. 

Trustees,  the  seven,  31. 


Union  Pacific  Eastern  Division,  see 
Kansas  Pacific. 

Union  Pacific  Railway ,  by  John  P.  Davis, 

1 1. 

Union  Pacific  Railroad  Co.,  organization, 
15;'  subscriptions  to  stock,  17,  18; 
ground  broken  for,  18;  sells  cars  and 
materials  to  raise  funds,  18;  stock 
value,  36;  quarrels  with  Kansas  Pacific, 
46 ;  receivership,  67  ;  profits  expected 
from  building,  and  opposite  view,  69  ; 
coal  business,  91  ;  land  grant,  91. 

Value  of  Union  Pacific  stock,  36. 

Villard,  Henry,  66. 

Waterville  and  Washington  Railroad,  51. 

Wendell,  Cornelius,  bribe  paid  to,  34. 

Whitney,  Asa,  2 ;  memorials  to  Congress, 
3 ;  states  approving  plan  of,  6 ;  com¬ 
mittees  of  Congress  approving  plan  of, 
7;  arguments  for  plan  —  Whitney’s, 
3-6 ;  committee’s,  7  ;  bills  to  carry  out, 
3,  7-8. 

Williams,  John  M.  S.,  contracts,  28. 

Wilson,  J.  M.,  Chairman  of  House  com¬ 
mittee,  17,  77. 


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